An Analysis of the “Going Concern Assumption”: Text Mining from Japanese Financial Reports

ABSTRACT: Accounting standards in Japan have been updated frequently in recent years, creating confusion and difficulty for information users to compare financial numbers between different fiscal years or different companies. Under these circumstances, since March 31, 2004, the following sections have been required in annual reports: Uncertain Risk Information, Management's Discussion and Analysis, and Information Related to Corporate Governance. This additional disclosure increases the amount of material available for text mining/content analysis in evaluating companies' conditions. In this study we clarify the difference between going‐concern companies and non‐going‐concern companies by analyzing to the nonfinancial (qualitative) information disclosed in Financial Report in Japan (Japan 10‐K) using key words. The results of our study revealed that certain nonfinancial key words in financial reports can be used to evaluate corporate financial position.