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Chairman Michel Prada explains that only full use of IFRSs will bring needed familiarity

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Nov 11, 2014

The chairman of the IFRS Foundation Trustees, Michel Prada, delivered a speech entitled, "Japan and Global Standards," at a meeting of the Financial Accounting Standards Foundation's (FASF) stakeholders in Tokyo, Japan. In his speech, Mr. Prada took stock of the adoption of IFRSs around the world and commented on the situation in Japan.

Mr. Prada commented on the increasing number of jurisdictions adopting IFRSs and explained that for most industry sectors in the world, IFRSs are now the predominant basis on which companies' financial statements are prepared. As part of the reason for this success, he explained that "investors have a clear bias for the familiar" and that IFRSs have by now become the means to provide that familiarity to international investors. Jurisdictions or entities that decide not to apply IFRSs would need to be aware of becoming increasingly isolated and that the "costs of being outside the familiarity of the IFRS system" would rise.

Mr. Prada then spoke of the large economies that still have not adopted IFRSs (China, India, the United States, and Japan) and pointed out encouraging developments in all of them, although he admitted that regarding the United States, "progress has been slower than anticipated." Among these jurisdictions, he especially noted Japan and the careful and considered approach to the use of IFRSs that has been chosen in Japan. He claimed that the option of voluntary adoption of IFRSs was being watched carefully by other jurisdictions since it would allow larger, multinational entities to benefit from IFRSs without immediately forcing smaller, more domestically focused entities to adopt a new system.

Among the encouraging developments in Japan, Mr. Prada also discussed the introduction of the Japanese Modified International Standards (JMIS) and the exposure draft issued by Accounting Standards Board of Japan in July 2014. He commented:

I have no strong views on JMIS, and it is up to the Japanese authorities to determine what transitional steps to IFRS are required. However, if investor familiarity is the goal then this can only come from the full use of IFRS.

Mr. Prada concluded his speech by underlining that the IFRS Foundation and the IASB have evolved into a global accounting standard setter, willing and able to take on the resulting responsibilities but also willing to always keep and open mind and listen to and learn from the stakeholders.

The full text of Mr. Prada's speech is available on the IASB's Web site.

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