issues relating to application of ifrss in japan€¦ · november 28, 2012 accounting standards...

Copyright © 2009 Accounting Standards

Board of Japan All rights reserved.

Issues relating to Application

of IFRSs in Japan

November 28, 2012

Accounting Standards Board of Japan

lisac

Text Box

Agenda paper 6.1

To share the followings with AOSSG members

Overview of “where we are now”

Issues/concerns identified by Japanese stakeholders

ASBJ’s initiatives to respond to these issues/concerns

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Copyright © 2012 Accounting Standards Board of Japan . All rights reserved.

Objective of the presentation

Approach presently taken in Japan Continue convergence between J-GAAP and IFRSs

Permitted voluntary application of IFRSs

Mandatory application of IFRSs? BAC continues the discussion

See Appendices for “Recent IFRSs developments in Japan”

Intensive dialogue during the process of “IASB’s Agenda

Consultation 2011” → various issues/concerns emerged

ASBJ - providing assistance to reporting entities that have

opted for voluntary application of IFRSs Various issues emerged out of voluntary application process

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Copyright © 2012 Accounting Standards Board of Japan . All rights reserved.

Background

Requirements in IFRSs Revaluation of PPEs (IAS 16) – Non-recycling

Investments in equity securities for OCI option (IFRS 9) – Non-recycling

FV measurement of financial liabilities under FVO (IFRS 9) – Non-recycling

Post-employment benefit (IAS 19) – Non-recycling

Cash flow hedge (IAS 39) – Recycling

Net-investment of foreign operation (IAS 21) – Recycling

More to come…

Issues/concerns identified by Japanese stakeholders “Net income” has been an important measure for investors

Is recycling essential to the relevance of “net income”?

What is ASBJ doing? Started a research project on measurement

Support IASB’s Conceptual Framework project

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Copyright © 2012 Accounting Standards Board of Japan All rights reserved.

Issue #1 – Net Income, OCI &

Recycling

Requirements in IFRSs Optional treatments

Re-measurement model for PPEs & Intangible assets (IAS 16 & IAS 38)

Fair value model for Investment Property (IAS40)

Mandatory requirements

Fair value measurement for Agriculture (IAS 41)

Measurement of investments in equity securities (IFRS 9)

Issues/concerns identified by Japanese stakeholders Are rationale for the FV measurement consistent among standards? Is FV reliably

measured in practice?

What is ASBJ doing? Started a research project on measurement

Support IASB’s Conceptual Framework project

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Issue #2 – Scope of FV Measurement

Goodwill impairment & amortization (IFRS 3) Requirements of IFRSs - Amortization of goodwill is not required or permitted

(Impairment-only approach)

Issues identified by Japanese stakeholders – Is impairment-only approach appropriate?

Does amortization & impairment approach better reflect the economics?

What is ASBJ doing? – ASBJ is undertaking a research project (questionnaire, roundtable,

presentation at IFASS meeting, academic research) to assist IASB’s PIR on IFRS 3

Capitalization of Development costs (IAS 38) Requirements of IFRSs – Capitalization of or costs incurred from the development phase

is required, when certain conditions are met

Issues identified by Japanese stakeholders – Is it appropriate to require capitalization of

development costs? Are the criteria in IAS 38 consistently applied?

What is ASBJ doing? – ASBJ is undertaking a research project (fact-finding studies,

presentation at IFASS meeting, academic research etc.) for IASB’s consideration

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Issue #3 – Goodwill & Development

Costs

Depreciation of PPEs (IAS 16) Issues identified by Japanese Japanese company’s depreciation method (often, diminishing balance method) vs. IFRS-adopters’

depreciation method (often, straight-line method)

Is diminishing balance method always inappropriate?

Is it necessary to unify the depreciation method (to straight-line method) among a group?

Unification of reporting dates Issues identified by Japanese stakeholders Japanese company’s year-end (March 31) vs. Overseas subsidiaries’ year-end (December 31)

Japanese multi-national companies have hundreds of subsidiaries (in an extreme case, a parent

company has about 1,000 subsidiaries!) & many things start from April in Japan (e.g.,

government fiscal year, school year)

How the term “unless it is impracticable to do so” should be applied in practice?

What is ASBJ doing? Formed “IFRS Practice Group”, to effectively communicate with IASB staff to

solve implementation issues 6


Issue #4 – Other application issues

Appendices - Recent IFRSs developments in Japan -

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Publication of the Interim Report

The Business Accounting Council (BAC) published “Opinion on the

Application of IFRSs in Japan (Interim Report)” in June 2009.

Voluntary application of IFRSs

In accordance with the recommendation in the Interim Report, voluntary application of

IFRSs has been permitted from the fiscal year ending March 2010

As of August 2012, there are eight companies that have voluntarily applied IFRSs.

According to the Nikkei newspaper, other ten companies are considering the voluntary

application

Possible mandatory application of IFRSs

It was suggested in the Interim Report that decision about possible mandatory application

of IFRSs is expected to be made around 2012

→ BAC is continuing its deliberation

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IFRSs developments in Japan - 2009 & 2010

Discussions at the BAC – From 2011 to 2012 (1/2)

BAC’s Interim Discussion Memorandum

The BAC convened ten meetings from June 2011 to June 2012

After ten meetings, the BAC issued the Interim Discussion

Memorandum which summarizes points that need to be discussed

when considering the implementation of IFRSs

Contents of the Interim Discussion Memorandum are as follows:

Global harmonization of accounting standards

Application of IFRSs

Providing Japanese views towards IASB

Non-consolidated financial statements

Application for small and medium-sized entities

Voluntary application of IFRSs

Addressing principles-based accounting

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Discussions at the BAC – From 2011 to 2012 (2/2)

BAC’s Interim Discussion Memorandum(cont’d)

There existed widely diverse opinions (partial mandatory

application vs. voluntary application only), and the BAC has not

reached the final conclusion.

It was suggested that voluntary application of IFRSs should be

accelerated, so as to accumulate experiences using IFRSs.

Further examination as to which standards in IFRSs are difficult to

accept is warranted.

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Thank you!

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