Require IFRSs for Japanese listed companies?

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16 Feb 2009

The Japan Financial Services Agency (FSA – the securities regulator) has launched a public consultation on Application of International Financial Reporting Standards (IFRS) in Japan.

The official consultation document – known as the Draft Interim Report of the Business Accounting Council – is, of course, in Japanese. However, the FSA has released a provisional and unofficial English Translation of the Draft Interim Report (PDF 100k). In the FSA Press Release (PDF 31k) announcing the consultation, the FSA said that the following are the key points of the Draft Interim Report:
  • The use of IFRS on a voluntary basis could be permitted, for instance, from the fiscal year ending March 31, 2010, for the consolidated financial statements of certain listed companies. However, the decision needs to be made after assessing various factors.
  • On the other hand, the decision regarding the mandatory use of IFRS could be made around, say, 2012. However, this timing could be moved either forward or back depending on various factors and the situation of the implementation of the use of IFRS on a voluntary basis.

Contents of the Draft Interim Report:

  • I. International Developments in Accounting Standards 1. Progress in Convergence of Accounting Standards 2. Developments in Other Countries toward IFRS Application
  • II. The Direction for Japanese GAAP 1. The Need for Continuing Convergence of Japanese GAAP 2. Issues Concerning the Application of IFRS in Japan and the Required Approach
    • (1) Basic concept regarding the application of IFRS by Japanese companies
    • (2) Issues Concerning the Application of IFRS
    • (3) Optional Application of IFRS
    • (4) Considerations for Future Mandatory Application
  • III. Toward Future Action
On page 15, the Draft Interim Report states that Japan will consider 'carve-outs' from IFRSs:

Nevertheless, because of the grave importance of accounting standards as the yardstick for assessing financial statements, with punitive action under law taken in case of violation, there may be cases in which Japan must suspend application of the parts of IFRS developed by the IASB that are found seriously inappropriate and cannot be recognized as accounting standards 'that are generally fair and just' in Japan.

The deadline for comments is 6 April 2009.


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