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IASB® Chairman discusses Japan and IFRS® Standards

  • IFRS - IASB Image

Aug 29, 2018

On August 29, 2018, the International Accounting Standards Board (IASB) released a speech by IASB Chairman Hans Hoogervorst, given at an event hosted by the Accounting Standards Board of Japan (ASBJ) in Tokyo. His speech, entitled "Japan and IFRS Standards" covered (1) key takeaways from Japan's approach to IFRS Standards, (2) accounting for goodwill, and (3) the IASB's better communication project.

Mr. Hoogervorst began by discussing progress towards global accounting standards and reflected on Japan's "very interesting economic experiment" of letting the market decide whether to adopt IFRS. He noted:

[A]round 200 mostly big, multinational Japanese companies have chosen to adopt full IFRS Standards, representing more than 30% of the total market capitalisation of the Tokyo Stock Exchange. . . . The number of Japanese companies using US GAAP has been steadily shrinking and is expected to be less than 10 soon.

Mr. Hoogervorst went on to discuss the reason the IASB changed its mind and decided to possibly reintroduce amortization of goodwill in an upcoming discussion paper. (The IASB has not listed an expected date for this DP in its work plan.) He noted that the post-implementation review of IFRS 3 identified "a couple of problems" with the impairment-only approach to goodwill:

[T]he annual impairment test is both costly and subjective. Often, the projections of future cash flows from cash generating units tend to be on the rosy side. Impairment losses therefore tend to be identified too late. And when an impairment loss is finally booked, the resulting information has only weak confirmatory value for investors.

After the discussion of goodwill, Mr. Hoogervorst described the IASB's better communication project, promising to "improve what we have, rather than create big, new Standards." He underscored that upcoming projects will improve financial reporting at "much less cost" because the focus will be on presenting better information that is already being collected. He then detailed aspects of the "strands of work" that fall under the umbrella of better communications, including primary financial statements and management commentary. 

Review the full version of Mr. Hoogervorst's speech on the IASB's website.

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