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Q1 Where can I find IIJ's results of operations?
Yearly and quarterly results of operations can be found in Consolidated Financial Results.
Q2 What accounting principle does IIJ adopt?
IIJ adopted International Financial Reporting Standards (IFRS) from the filing of FY2018 annual securities report (filed June 28, 2019).
Q3 Please tell me the differences between IFRS and U.S. GAAP.
There are not so significant difference for revenue recognition and goodwill. As for differences, please refer to below.
Q4 Please explain what impact does the adoption of IFRS 16 "Leases" have on you.
Along with the adoption of IFRS 16 "Leases," from 1st quarter FY2019, there are following changes.
Q5 I'd like to know about revenue recognition.
Network service revenues are billed and recognized monthly on a straight-line basis. Initial set up fees received in connection with network services are deferred and recognized over the estimated average period of the subscription for each service. Systems construction (equipment sales included) are recognized when related performance obligations are satisfied, but under some conditions, revenue and related costs are recognized over the periods during which the performance obligations are fulfilled. Monitoring, operating, and hardware and software maintenance services generally commence once our customers have accepted the system and their contract periods are generally one to five years. Our contracts include a stated annual fee for these services.
Q6 Is there a certain cycle for quarterly revenue and operating profit?
Corporate spending in Japan has the tendency to become the largest in the fourth quarter and the lowest in the first quarter as many Japanese companies have fiscal years ending March 31. Our systems integration revenues and operating profit are most likely to be the largest in the fourth quarter as most of our customers has fiscal years ending March 31.
Q7 When is the next earning release scheduled?
IR schedule is frequently updated on the IR Calendar.
Q8 Where can I find the latest financial statements?
IR documents can be found in IR Library.
Q9 What is your financial target for FY2021?
With regard to our business outlook for FY2021, we expect continued growth in revenues and gross profit for recurring transactions, such as network services, under the aforementioned assumptions of the market environment. In mobile services, we expect a decrease in revenue due to a reduction of average revenue per user caused by our new consumer plan, which reflects cost reduction of mobile interconnectivity charge. In systems integration, in addition to continued growth, we expect an increase in revenues and profits due to the acquisition of PTC SYSTEM (S) PTE LTD. Which became our wholly owned subsidiary in April 2021. Considering first half of FY21, we revised our FY2021 financial targets upward on November 5, 2021. The new FY2021 financial targets are as follows: our consolidated financial targets for FY2021 are as follows: total revenues of JPY228.5 billion (up 7.3% from FY2020), operating profit of JPY22.0 billion yen (up 54.4% from FY2020), profit before tax of JPY21.5 billion yen (up 53.2% from FY2020) and profit attributable to owners of the parent of JPY13.7 billion yen (up 41.1% from FY2020).
For details, please refer to 2Q21 financial results presentation material.
Q10 Please tell me about the risk factors for growth.
Our business is principally conducted in Japan and most of our revenues are from customers operating in Japan. If the Japanese economy deteriorates or does not improve, and it results in significantly lower levels of network-related investment, especially in network systems construction which may have significant influence on our corporate customers' investment, or if corporate customers respond to conditions by prioritizing low price over quality, it may become difficult to maintain our current level of revenues or achieve our expected revenues and profits. If we experience cancellation of large accounts, it may also become difficult to maintain our current level of revenues and margins or achieve our expected revenues and profits.
For details, please refer to Risk Factors.
Q11 What are IIJ's major tangible assets?
Majority of our tangible assets are data communications equipment, office and other equipment. Along with the adoption of IFRS 16, leased assets are accounted for as right-of-use assets from the fiscal year ended March 31, 2020. As of March 31, 2021, we recorded JPY17.08 billion of tangible assets and JPY50.34 billion of right-of-use assets (tangible).
For details, please refer to FY2020 Annual Securities Report Note 11 (page 108-109) and Note 16 (page 118) .
Q12 What are IIJ's major goodwill and intangible assets?
Majority of our intangible assets are software necessary for our business. Along with the adoption of IFRS 16, leased assets are accounted for as right-of-use assets from the fiscal year ended March 31, 2020. As of March 31, 2021, we recorded JPY16.95 billion of intangible assets, of which JPY14.64 billion were software, and JPY0.37 billion of right-of-use assets (software).
For details, please refer to FY2020 Annual Securities Report Note 12 (page 110-112) and Note 16 (page 118) .
Q13 Where should I look for borrowings?
As of March 31, 2021, the total balance of our borrowings was JPY25.56 billion（JPY27.75 billion as of March 31, 2020).For details, please refer to FY2020 Annual Securities Report ”Risks regarding future funding needs” (page 35) .
Q14 (ref. QA) Please tell me the differences between Japanese GAAP and U.S. GAAP.
There are differences such as,
Q15 (ref. QA) I'd like to know about how you now record changes in unrealized gains/losses on holding available-for-sale equity securities following the revision of U.S. GAAP.
Following the revision of U.S. GAAP, from 1Q18, gains/losses on other investments due to fluctuations of fair value of holding marketable equity securities and funds are recorded as "realized and unrealized gain (loss) on other investments, net" in "other income (expenses)" on our consolidated statements of income.
"Realized and unrealized gain/loss on other investments, net," for FY18 was JPY1,110 million of loss. The breakdown of which were loss of JPY1,542 million on marketable equity securities and gains of JPY432 million on funds that were available to be measured at fair value.
For details, please refer to page 6 of our FY18 earnings release titled "IIJ Announces Full Year and Fourth Quarter Financial Results for the Fiscal year Ended March 31, 2019" published on May 14, 2019 and page 22 of our 4Q18 presentation material for the earnings.
When excludes gains/losses on marketable equity securities and funds to which accounting policies were changed, our FY18 income before income tax expense and net income attributable to IIJ would have been as follows:
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