December 11, 2009
Financial Services Agency
Publication of the Revised Cabinet Office Ordinances, etc. for the Voluntary Application of International Financial Reporting Standards in Japan
On December 11, 2009, the Financial Services Agency (FSA) published a set of revised Cabinet Office Ordinances, including “Regulation for Terminology, Forms and Preparation of Consolidated Financial Statements” and “Cabinet Office Ordinance on Disclosure of Corporate Information,” etc.
With these revisions, Japanese listed companies which meet certain requirements (“Specified Companies”) will be given the option to prepare their consolidated financial statements, starting from the consolidated fiscal years ending on or after March 31, 2010, by applying IFRSs designated by the Commissioner of the FSA through public notice. Please refer to the attached document for the summary of the revised Cabinet Office Ordinance, etc.
The publication of these revised Cabinet Office Ordinances, etc. officially provides an operational framework for the voluntary application of IFRSs, starting from the fiscal years ending on or after March 31, 2010, as the first step toward the application of IFRSs in Japan, following the roadmap, “Application of International Financial Reporting Standards (IFRS) in Japan (Interim Report)” released by the Business Accounting Council on June 30, 2009. On the second step, the decision regarding the mandatory use of IFRSs is to be made around 2012, while giving due consideration to various factors, including whether: 1) financial statements preparers, auditors, investors and other stakeholders are well prepared for practical application of IFRSs through sufficient training and education on IFRSs; 2) due process for setting of IFRSs is ensured and governance of the IASCF strengthened; and 3) process of setting IFRSs gives proper consideration to the economic reality of business and trade practices in various countries.
The revision also includes discontinuing the current treatment where certain Japanese listed companies are allowed domestically to submit their consolidated financial statements prepared under U.S. Generally Accepted Accounting Principles; the treatment will no longer be valid for consolidated fiscal years ending after March 31, 2016.
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