The Financial Services Agency (FSA) of
Japan has released a provisional English translation of its IFRS
road map proposal.

The report proposes the use of IFRS be
permitted on a voluntary basis for the consolidated financial
statements of certain listed companies from the financial year
ending 31 March 2010.

It proposes the mandatory use of IFRS by 2012
but says such timing may vary depending on numerous factors.

“There are many issues to be resolved before
the application of IFRS, such as the examining the details of IFRS;
ensuring Japan’s active participation in the standards-setting
process; the issue of preparations by businesses, auditors,
investors and regulators; as well as the uncertainties over the
future developments in the US,” the regulator said.

The targets are part of the Tokyo Agreement
between the Accounting Standards Board of Japan and the
International Accounting Standards Board, which removed major
differences between Japanese GAAP and IFRS at the end of 2008 and
aims to have all differences removed by 30 June 2011.

The report also follows the European
Commission’s announcement in December 2008 that Japanese GAAP is
equivalent with the IFRS as adopted by EU.

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The proposal said areas that need to be
addressed include the training and education for the better
understanding of IFRS among investors, preparers, auditors,
regulators and educators. In particular, it suggests the
development of an inspection system for auditing firms involved in
IFRS-based auditing.

A key part of the considerations for future
mandatory application is a call for Japan to strengthen its
contribution to the standard-setting process for IFRS and
governance of the International Accounting Standards Committee
Foundation.

The paper also notes the need to develop XBRL
taxonomies that comply with Japanese GAAP as the number of data
items disclosed by the IASC is far smaller than the number in the
Japanese GAAP taxonomy.

“The need for Japanese GAAP will never go away
even after IFRS adoption ,” the proposal stated. “Stakeholders are
expected to take necessary action aimed at ensuring Japanese GAAP
continues to be of high quality.”

A full proposal is only available in Japanese.
Comments must be submitted by 6 April.