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September 14, 2008

IFRS discussions heat up in Japan

Japan urgently needs to consider ways to adopt IFRS, according to the Japanese Institute of Certified Public Accountants (JICPA).

The institute cites the continued spread of IFRS, including the recent moves in the US, as factors behind its claim, which comes in the wake of a four-day European tour where representatives visited European firms, standard setters, institutes and regulators to hear about their experiences in the shift to international standards.

The nation signed an agreement with the International Accounting Standards Board (IASB) to accelerate convergence with IFRS in August last year. However, no date has been set for convergence. The JICPA said the overall opinion from Europe was the switch to international standards was “challenging but successful”. The institute also identified a series of observations and issues that must be addressed in Japan.

The first is that listed companies should be given the option of using IFRS only for their consolidated financial statements, while Japanese GAAP should remain used for non-consolidated financial statements.

The institute also noted that improved and enhanced education and training on IFRS is indispensable for the profession, students, and most importantly, the members of the business community who are responsible for preparing financial statements.

The institute said is it also essential Japan seeks more involvement in standard-setting by the IASB and to establish various channels for such involvement. “Further, we believe that IFRS adoption is a prerequisite condition to be met if Japan is to become involved and wield influence,” the institute said.

The institute is now considering a series of steps that it expects to develop into a conversion road map.

These include study and deliberation on measures to address issues in auditing expected to arise from the application of the principles-based IFRS.

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