Finalised ordinances allow wider voluntary use of IFRS in Japan
29 Oct 2013
The Financial Services Agency of Japan (FSA) has released revised ordinances that increase the number of Japanese companies that can voluntarily adopt International Financial Reporting Standards (IFRSs) as designated by the FSA, which is currently identical to the effective IFRSs as issued by the IASB. The ordinances are effective immediately and permit Japanese listed companies and those applying for a listing to use designated IFRSs in their consolidated financial statements on a voluntary basis, if they establish internal processes to ensure appropriate reporting under designated IFRSs, with officers or employees who have sufficient knowledge of the subject being in place.
The revised ordinances respond to one of three major initiatives recommended by Japan's Business Accounting Council (BAC) in June 2013 to facilitate further use of IFRSs in Japan, and follows a public consultation request on the proposed revisions issued by the FSA in August 2013.
Based on the FSA's statistics, the revised ordinances increase the number of companies in Japan that are eligible to voluntarily adopt designated IFRSs from approximately 600 to over 4,000. Prior to the revision, the ability to voluntarily adopt designated IFRSs was effectively restricted to listed Japanese companies with international financial and/or business activities.
In addition to the wider ability to voluntary adopt IFRSs, the BAC recommended the introduction of 'endorsed IFRSs' in Japan and the simplification of disclosures in separate financial statements in June 2013. Although the ASBJ, the local accounting standard setter, has embarked on deliberating the endorsed IFRS, a full picture of the ultimate consequence of these initiatives has yet to emerge. A presentation by a FSA personnel in front of the IFRS Advisory Council earlier this month as well as an article by the ASBJ Chair are one of the most recent hints provided by those directly involved in the process on these matters.
More information on the revised ordinances is available on the FSA website (in Japanese).
