Seeking International Collaboration
on Accounting Standards

1. Development of Japan's accounting and auditing standards and restoration of global acknowledgement

Thanks to the formulation and introduction of a series of new standards from 1997, the establishment of the Accounting Standards Board in 2001 and the revision of the Certified Public Accountant Law in 2003, Japan's accounting and auditing standards have already been raised to a level that compares favorably with international levels. It is imperative that this should be fully understood by people involved in the market, both within Japan and overseas.

2. Mutual recognition of accounting standards in Japan, the United States, and Europe

Nippon Keidanren considers it desirable that accounting standards in the three major capital markets-those of the United States, Europe, and Japan-move in a direction in which the basic principles are unified to the greatest extent possible. At this stage, however, differences remain between countries in a number of areas, including capital markets systems, and the relationships between accounting standards and company law and tax law. Given the present state of global capital markets and the existing disparities surrounding accounting standards, Nippon Keidanren considers it important to create a system in which Japan, the United States, and Europe accept financial statements based on each other's standards.

To achieve this goal, the FSA of Japan should make rapid and forceful approaches to the SEC, the European Commission, and other relevant bodies, concerning the acceptance of Japanese accounting standards.

3. The Desirable Form of the IASB

(1) Large-scale review of IASB governance

There are mounting concerns, not only about the content of the accounting standards that the IASB has been studying, but also about its governance and the procedures it adopts for its studies. Indeed, criticism of the IASB is voiced in European Union and other countries. It is essential 1) for the International Organization of Securities Commissions (IOSCO) to work closely with the IASB, 2) for IASB to create a structure to ensure that in the study of standards by the IASB, the opinions of national governments, regions, preparers and users of financial statements, and others, are properly considered, 3) for economic organizations to collaborate with each other countries and to voice its opinions in a timely manner.

(2) Opinions on specific points at issue

1) Reporting Performance

We strongly oppose the IASB's proposal for discarding the concept of net income in income statements in their present form and of prohibiting recycling.

2) Full fair value accounting for financial instruments

Considering how the JWG draft was received, IASB would do well to remember that the concepts behind full fair value accounting have been rejected worldwide.

3) Accounting for post-employment benefits including pensions

We oppose the aggregated recognition of actuarial losses and the removal of the corridor rule.