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June 29, 2009

Japan proposes IFRS roadmap

Japanese listed companies could begin filing financial statements in accordance with IFRS for fiscal years beginning as early as 1 April 2009 if a key endorsement for Japan’s IFRS roadmap is accepted by Japan’s financial regulator.

This month the Business Accounting Council, the key advisory body to the commissioner of Japan’s Financial Services Agency (FSA), approved a roadmap for the adoption of IFRS in Japan.

It proposes mandatory adoption of IFRS for Japan’s listed companies from 2016, subject to a final decision being taken by 2012.

Early adoption would be permitted for the fiscal year that began on 1 April 2009.

If IFRS is adopted, the transition may be made either by a ‘Big-Bang’ or phased-in approach based on the size of companies.

The Business Accounting Council noted it is important to ensure a sufficient preparation period of at least three years before the mandatory use starts.

The proposal outlined a series of issues to be considered when deciding whether to adopt IFRS.

These included improved due process and governance of the IFRS-setting process. Improvements should include increased accountability to regulators and market participants, and enhanced feedback to stakeholders regarding standard-setting.

The decision by the International Accounting Standards Committee Foundation to establish a monitoring board was lauded as a critical starting point for the enhanced governance.

The foundation should continue to work towards improved governance, with steps including upgrading the Standards Advisory Council and securing a stable source of funds, the proposal said.

International Accounting Standards Board chairman David Tweedie said it was a landmark decision, both for Japan and for IFRS.

The roadmap still requires the formal approval of the FSA, which is expected to take place by the end of the month.

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