International Financial Reporting
Standards Update
Selected Topics
from the 2005 Tax Reform Act
Selected Topics
from the Commercial Code Amendment
O&C New Business Introduction
of Staffing Services
OKAMOTO & COMPANY
International Accounting Office
/ Hanato Tax Accountant Office
Hirakawacho Daiichi Seimei Building 1F,
1-2-10 Hirakawacho, Chiyoda-ku Tokyo Japan 102-0093
TEL +81-3-5276-0900
FAX +81-3-5276-0950
E-mail:info@okamoto-co.com
International Financial Reporting Standards Update |
In the past, due to differrent and/or incomplete accounting standards, investors had a hard time analyzing and distinguishing good investments from bad ones. However, in recent years, the developments in the European Union and the US have brought the entire capital market community under a single set of globally accepted accounting standards.
By the decision of the European Parliament and the Council of the European Union, the EU required all listed EU companies to prepare consolidated financial statements using the International Financial Reporting Standards (IFRS) starting from 2005. Non-EU companies listed in the EU must report under the IFRS or a similar level standard starting from 20071.
In the US, Donald Nicolaisen, chief accountant of the SEC, stated that he staunchly supports the efforts to expand the development and use of the IFRS. On April 22, 2005, a roadmap was prepared which sets out the steps the SEC will take to eliminate the need for companies using the IFRS to reconcile to US GAAP standards possibly as soon as 2007, but no later than 20092.
Finally, in Japan, foreign issuers may use financial statements based on their own country's standards, or a third-jurisdiction's standards. However, these standards must be approved by the FSA and are also required to disclose the differences between the accounting standards. Standards of the US, Germany, France and the UK have been accepted. The Accounting Standards Board of Japan (ASBJ) and the International Accounting Standards Board (IASB) met on March 9, 2005 to discuss about a joint project with the final goal of convergence of their standards with another meeting set for September. The Financial Services Agency (FSA) in Japan is working hard to establish equivalence by 2007.
In addition, the IASB is continuing its efforts on the establishment of an accounting standard for Small and Medium-sized Entities (SMEs)3. Similar movements are also underway with the AICPA with their own task force.
1. The Committee of European Securities Regulators (CESR) published a draft technical advice on April 27, 2005 on the equivalence of Japanese GAAP and taken as a whole, determined it to be equivalent to IFRS, subject to a number of additional disclosures.
2. From 2006, non-US companies who file with the SEC (forign private issuers) can file financial statements using IFRS.
3.SMEs are entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users.