Essay About Ifrs Standards And Background Of Accounting Practice

Japan International Business
Table of ContentsIntroduction        2Content        3i)        Background of accounting practice in Japan        3ii)        Reasons why Japan chooses not to mandatory adopt IFRS.        5iii)   Discussion on IFRS standards, adequacy of disclosures and presentation of financial information in accordance with IFRS requirement.        7iv)   Describe the reasons given in the Annual Report on IFRS adoption and the expected benefits from voluntary adoption.        16Conclusion        18References……………………………………………………………………………………………..19Appendix I……………………………………………………………………………………………21Appendix II…………………………………………………………………………………………….22IntroductionContent Background of accounting practice in Japan        Japanese accounting practices is very unique as it was developed from a different set of national characteristics and financial markets from the other countries. To be precise, the government has influenced them strongly over the years. The original bookkeeping in Japan is called “Cho-ai”, which established widely among big companies and was used individually in each company in the Edo era (the feudal period) which is 1603-1867, especially on the second half of the era (Watanabe, 2011). On 1867 after the Restoration of Imperial Rule, Japan took the path towards modernization which is called Meiji era (modern capitalism) or Industrial Revolution. During this era, the government brought in the new bookkeeping system which is the double entry system instead of using its original and traditional “Cho-ai” system. The purpose of the formation of the new principle of double entry bookkeeping system is to unify the Japanese bookkeeping system with the systems used in the Europeans and Americans countries. In the decades that followed, Japan experiences multiple changes in their accounting standards and practices. Finally, four standards available in Japan which are United States Generally Accepted Accounting Principles (US GAAP), Japanese Generally Accepted Accounting Principles (JGAAP), International Financial Reporting Standards (IFRS) and Japans Modified International Standards (JMIS). The companies have the liberality to choose to adopt the standard they preferred.The US GAAP is established in 1939 in US and eventually being adopted by most of the Japanese companies (Zeff). In year 2001, the accounting standard setter, Accounting Standard Board of Japan (ASBJ) develops the JGAAP.  The accounting and reporting standards also include the accounting standards set by the Business Accounting Council (BAC) and practical guidelines issued by the Japanese Institute of Certified Public Accountants. The ASBJ facilitate Japan’s participation in the IASB to make Japanese accounting standards more consistent with other major countries (Urasaki, 2014). The ASBJ together with International Accounting Standards Board (IASB) jointly announced the Tokyo Agreement to accelerate convergence between JGAAP and IFRS in August, 2007 (Urasaki, 2014). The ASBJ puts in effort in publishing new accounting standards to replace the old standards or amending some of the existing standards to deal with new accounting events and converge with IFRS. Japanese public companies are allowed to voluntarily start using IFRS from the fiscal year ending March 31, 2010 (Li Li Eng, 2013). In 2013, the Financial Service Agency (FSA) revised its Cabinet Office Ordinances and eliminated certain requirements in order to enhance further application of IFRS in Japan (Urasaki, 2014). As a result, the number of companies eligible to apply IFRS in their consolidated financial statements was increased. In 2015, ASBJ officially issued JMIS which resulted from the authorization process of accounting standards and interpretations issued by the IASB. This development is attempt to reduce the discrepancies between existing Japanese standards and “pure” IFRS by updating certain provisions to retain some Japanese accounting practices.