Possible mandatory adoption of IFRSs in Japan
While Japan has considered the possible mandatory adoption of IFRS by public companies for some time, a decision to that effect is yet to be made. Currently, Japan is promoting greater use of IFRSs on a basis of voluntary adoption as explained above.
On 20 June 2013, the Japanese Business Accounting Council (BAC) released its final report titled "The Present Policy on the Application of International Financial Reporting Standards (IFRS)". The report recommended a number of measures to contribute to greater, but not mandatory, use of IFRSs in Japan. Among others, the key recommendations in the final BAC report were:
Increase the number of companies that can adopt designated IFRSs on a voluntary basis by eliminating certain eligibility requirements (already implemented in October 2013)
The introduction of endorsement process and 'endorsed IFRSs' in Japan, which may include limited amendments to IFRSs based on specific criteria. The 'endorsed IFRS' would be promulgated by the Accounting Standards Board of Japan (ASBJ) and to be approved by the FSA. The ‘endorsed IFRS’ would be available for voluntary adoption by Japanese companies
Simplification of disclosure requirements in separate financial statements under Japanese GAAP
If the second recommendation from the BAC report is fully implemented, Japanese public companies may be able to use one of four sets of accounting standards in their consolidated financial statements (subject to certain eligibility requirements), namely:
designated IFRSs
endorsed IFRSs
Japanese GAAP, or
US GAAP.
The ASBJ is in the process of developing endorsed IFRSs, targeting completion during 2014, but has not made a formal decision. The ASBJ plans to consider IFRSs as issued by the IASB on or before the end of 2012 in initially developing 'endorsed IFRSs', and the ASBJ will then adopt an on-going process to cover standards issued in or after 2013.