FFRI is a cybersecurity company using misleading accounting to create the appearance of a turnaround when in reality, its core business revenues have declined.
Without booking government R&D subsidies as topline revenue—a practice no other comparable Japanese company uses to generate profit—FFRI's revenues would have fallen 1% instead of growing 24%. The company's main software product, Yarai, saw licenses peak in 2019.
Subsidies Booked as Revenue
FFRI is the only company found that records NEDO R&D subsidies as topline revenue generating profit—9 peers use conservative accounting.
R&D Paradox
While receiving R&D subsidies to increase spending, FFRI's R&D expenses declined 13%—this should not be happening.
Pass-Through Entity
The Cyber Research Consortium (CRC), managed by FFRI's President, appears to operate as a pass-through entity obscuring true R&D costs.
Capitalized Membership Fees
FFRI capitalized ¥480M in CRC membership fees instead of expensing—if expensed, operating profit would decline 32%.
Suspended Auditor
ASKA & CO, which approved these practices, was suspended for 6 months by the FSA for "grossly improper" operations.
Mid-Year Segment Change
FFRI changed segment accounting in Q4 FY3/25, obscuring the full impact of K Program subsidies on reported growth.
| Company | Subsidy Treatment | Profit Impact |
|---|---|---|
| FFRI Security | Topline revenue | ✗ Generates Profit |
| ExaWizards | Non-operating income | ✓ No Impact |
| Fixstars | R&D expense reduction | ✓ No Impact |
| Dynamic Map Platform | Non-operating income | ✓ No Impact |
| iSpace | Other income (below OP) | ✓ No Impact |
| ABEJA | Net cost vs R&D expenses | ✓ No Impact |
| Japan Engine | Non-operating income | ✓ No Impact |
| ACSL | Non-operating income | ✓ No Impact |
| Astroscale | Other income (below SG&A) | ✓ No Impact |
Revenue Breakdown: Reported vs. Reality (FY3/25)
March 2019
Yarai Licenses Peak
FFRI's main software product hits peak licenses at 747,181—beginning years of decline.
FY3/24
Stock Underperforms Despite Results
Despite better results, stock price continued to suffer as investors recognized stagnant core business.
FY3/25
K Program Revenue Booking Begins
FFRI convinces auditor to book R&D subsidies as topline revenue—transforming declining business into apparent turnaround.
May 2025
Surprise Segment Change
FFRI changes segment accounting mid-year, obscuring that National Security Sector would have shown 148% growth solely from subsidies.
2025
ASKA & CO Suspended
The auditor who approved FFRI's novel accounting is banned for 6 months by FSA for "grossly improper" operations.