Japanese

ACCOUNTING FORUM2008

No. 16

JAPAN ACCOUNTING ASSOCIATION

Japan Accounting Association.
Liaison Office: Hayashi Building, 1-10 Kanda Nishiki-cho, Chiyoda-ku,
Tokyo 101-0054, Japan
Copyright© 2008, Japan Accounting Association1

Japanese ACCOUNTING FORUM 2008
JAPAN ACCOUNTING ASSOCIATIONPREFACEJapanese ACCOUNTING FORUM of Japan Accounting Association (JAA) is
published annually to publicize academic activities of JAA in English.
The first issue of Japanese ACCOUNTING FORUM was published in 1993. This
edition for 2008 is the 16th issue of Japanese ACCOUNTING FORUM.
This issue contains the summary of presentations at the 66th Annual Conference of JAA
which was held at Matsuyama University in Ehime Prefecture on September 1-3, 2007.
It also includes the reports of regional activities of JAA during the 2007 academic year.
I sincerely hope that Japanese ACCOUNTING FORUM serves the readers to better
understand the activities of JAA.

Kazuo Hiramatsu
Chairman of the International Committee andManaging Editor, Japan Accounting Association

Contact:

Professor Kazuo Hiramatsu
School of Business Administration
Kwansei Gakuin University
1-1-155 Uegahara, Nishinomiya, Hyogo 662-8501, Japankhira@kwansei.ac.jp2Japanese ACCOUNTING FORUM 2008
The 2008 Editorial Board

Managing Editor:
Kazuo Hiramatsu,

Kwansei Gakuin University

Deputy Managing Editor :Noriyuki Konishi, Okayama University
Editors:
Akihiro Noguchi, Nagoya University
Norio Sawabe, Kyoto University
Takashi Yaekura, Hosei University
Koji Kojima, Kwansei Gakuin University

3

Past Editors of the Japanese ACCOUNTING FORUM :1993 - 1997
Seigo Nakajima, Managing Editor, Ferris University
Yukio Fujita, Deputy Managing Editor, Aichi Gakuin University
Youichi Hara, Ritsumeikan University
Kazuo Hiramatsu, Kwansei Gakuin University
Toshiro Hiromoto, Hitotsubashi University
Yoshiaki Jinnai, Tokyo Keizai University
Yoshihide Toba, Senshu University
1998 – 2000
Nobuo Kamata, Managing Editor, Chubu University
Kazuo Hiramatsu, Deputy Managing Editor, Kwansei Gakuin University
Tokugoro Murayama, Deputy Managing Editor, CPA
Shinji Hatta, Surugadai University
Akihiro Noguchi, Nagoya University
Yasuhito Ozawa, Senshu University
Shigeto Sasaki, Senshu University
Kazumasa Takemori, Chubu University
2001 – 2003
Nobuo Kamata, Managing Editor, Chubu University
Kazuo Hiramatsu, Deputy Managing Editor, Kwansei Gakuin University
Shinji Hatta, Surugadai University
Norio Igarashi, CPA
Noriyuki Konishi, Senshu University
Akihiro Noguchi, Nagoya University
Michimasa Satoh, Nagoya University
Kazumasa Takemori, Chubu University
2004 – 2006
Michiharu Sakurai, Managing Editor, Senshu University
Kazuo Hiramatsu, Deputy Managing Editor, Kwansei Gakuin University
Yukio Sakaguchi, Senshu University
Hironao Iwata, Tokyo International University

4

JAPAN ACCOUNTING ASSOCIATION

Japanese
ACCOUNTING FORUM
No. 16,

2008

CONTENTS

PrefaceKazuo Hiramatsu(2)

ReportMitsunori Harada (7)Plenary Sessions
Plenary Session 1: Review of Japanese Accounting Theory and Praxis
Accounting Income and Economic Income: Two Boundaries and the Nature of
Accounting
Noriyuki Tsunogaya(9)Continuity and Discontinuity of Accounting Thought in New Standards
Hideki Fujii (11)Interaction between Financial and Tax Accountings and Its Breaking Off
Kazumi Suzuki (12)Efficiency and Equity of Financial Reporting
Kazuyuki Suda (13)Plenary Session 2 :Management Accounting as Management Systems

A Formation of Management Accounting in U.S. Big Business
Shinichi Korogi (14)Japanese Corporations' Organizational Principles and Management Control:
A study based on R. N. Anthony's theoretical framework
Eri Yokota (15)
Recognizing the Assimilative Process of the American-Type Cost Accounting
Systems to Our Country
Koji Yamamoto (17)5Plenary Session 3 : Transformation of Profit Information and Ideal Way ofFinancial Statements Audit
The fundamental problems in the financial statements audit arising from thechange of earnings information.
Takatoshi Hayashi (18)Concept of Earnings Quality and Meanings of Audit
Yukiharu Kurokawa (19)Research matters of audit and assurance services corresponding to qualitativechange in profit information
Fumio Naito (20)Need to Disclose Structured Information and its Auditability
Kenji Shiba (22)Special Committees
Research on Business Organization and Management Accounting
Toshiro Hiromoto (23)The comprehensive research on accounting-based firm valuation
Hisakatsu Sakurai (25)
Subject Research Committee
Implementation and Development of Cost Accounting in Our Country:
Literature Historical Research; Interim Report on Cost Control Function
Koji Yamamoto(26)

Study Groups
Change in Accounting Society and Market Logic
Yukiharu Kurokawa (26)
A Study on the International Movements of Environmental Financial Accounting
and its Basic Concepts
Masao Kawano (28)Calculate Regulations of Companies Act
Masamich Yoshioka (29)6

Regional Reports
Hokkaido Region
Tohoku Region
Kanto Region
Chubu Region
Kansai Region
Kyushu Region

Yuji Yoneyama
Yoshio Hosaka
Takaaki Kikui
Akihiro Noguchi
Toshio Ohno
Chikako Ozu

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2007 Annual Conference of JAA
Report2007 Annual Conference
Chairman of 2007
Annual Conference

Mitsunori Harada
Matsuyama University
Program
The 66th Annual Conference (2007) of the Japan Accounting Association was hosted
by Matsuyama University from September 1st through 3rd, 2007. The main theme of
the conference was “Going back to the Basics of Accounting”.
On September 1st, meetings of the Council and of the General Assembly ofMembership were held, and soon after those events, three Study Group research
reports, one Special Subject Committee research report and two Special Committee
research reports were presented. In addition to those, we had a Special Program (ASBJ
Session) sponsored by the Accounting Standards Board of Japan (ASBJ).
On September 2nd, before the sessions of the main theme, concurrent sessions were
held. One session was devoted to invited presentations by five Korean researchers.
Forty eight reports on various themes were presented at the other fourteen sessions. At
the session of the main theme mentioned above, three plenary sessions were held.
Finally, we had an Open Symposium in which many members and nonmembers
participated.
On September 3rd, before the panel discussions of the plenary sessions, forty eightreports on various themes were presented by the members at fourteen concurrent
sessions. After that, the panel discussions of the three plenary sessions were held very
actively.
A banquet was held in the evening on September 1st at the Student Union of
Matsuyama University. Five hundred and eighty five members and nonmembers
enjoyed the friendly party. During these three days of sessions, almost a thousand
participants attended the meetings and actively participated in discussions. The
conference of this year was a great success which is more than we had expected.
The schedule of the conference was as follows:8EventScreening Committee for Awards
Meeting of the Board of Directors
Meeting of the Council
Meeting of the General Assembly ofMembership
Study Group Reports
Special Subject Committee Report
Special Committee Reports
ASBJ Session
BanquetConcurrent Sessions
Plenary Sessions
1 Review of Japanese Accounting
Theory and Praxis
2 Management Accounting as
Management Systems
3 Transformation of Profit
Information and Ideal Way ofFinancial Statements Audit
Open Symposium
Creation and Growth ofEnterprise Value andBusiness Accounting
Concurrent Sessions
Panel Discussions
1 Review of Japanese Accounting
Theory and Praxis
2 Management Accounting as
Management Systems
3 Transformation of Profit
Information and Ideal Way ofFinancial Statements Audit

Date and TimeAug.31 14:00 to 16:00
16:00 to 18:00
Sep. 1
10:00 to 12:00
13:00 to 14:30

Venue
Matsuyama
University
Matsuyama
University

14:40 to 15:10
15:20 to 15:50
15:55 to 17:00
17:10 to 18:10
18:30 to 20:30
9:50 to 12:00
13:00 to 15:20

Matsuyama
University

Sep. 2

15:30 to 19:00

Sep. 3

9

9:50 to 12:00
13:00 to 15:00

Matsuyama
University

2007 Annual Conference of JAA
Plenary Session 1 :Review of Financial Accounting in Japan

Accounting Income and Economic Income:Two Boundaries and the Nature of Accounting
Noriyuki Tsunogaya
Kyushu University
The feature of the concept of economic income will be very much in agreementwith the "decision-usefulness approach", "asset and liability view", and the definitionof assets and liabilities ("future economic benefits concept") that are the basis ofcontemporary accounting concepts.
If we observe over a comparatively long time span, we could point out that there
exists a genealogy that attempts to place economic and accounting views on therelationship between a higher ("principle") and lower ("surrogate") ranks. The featureof this "economic monism" is summarized in the four following points. First, thetraditional realization concept is made light of as revenue recognition. Second, theservice-potentials concept is taken as an asset and liability definition. Third, as an ideal
measurement basis, a discounted present discount is taken and historical cost,replacement cost, and net realizable value are used as surrogates for it. Finally, it isthought to be natural that self-generating (internal) goodwill is recognized on thebalance sheet.
On the other hand, we can also point out that there exists another genealogy that isgoing to reconcile two opposing views. The feature of this "accounting and economic
dualism" can be expressed by the two following points. First, realized and unrealized
incomes are clearly distinguished. Second, the amount of change in a self-generating
goodwill is positioned as a key concept to bridge between economic, current value, andaccounting incomes.
Incidentally, the comprehensive income that is in the middle of economic andaccounting incomes is calculable by different two routes. Route 1 is based on thegenealogy of "economic monism". Whereas, route 2 is based on the genealogy of"accounting and economic dualism".

10

( Route1 )( Route 2 )ΔEquity (Net assets)

Comprehensive

Earnings＋Oher Comprehensive Income[Stock-oriented Income]

Income［Flow and Stock-oriented Income］"Economic monism""Accounting and economic dualism"

Ironically though, the more we emphasize the above mentioned features ofcontemporary accounting, the more an economic income concept or fair value
accounting will be pushed to the front, while the accounting income concept will
retreat. Do realization and recycling (reclassification) concepts really become
unnecessary? Inversely, why are these concepts required? What are the strong points
and demerits of fair value accounting? Although present value accounting (economic
income) and fair value accounting (fair value income) are along the same lines, there isa big difference between them whether to recognize self-generating goodwill or not.
Should we recognize self-generating goodwill on the balance sheet for investors,
creditors and other users to enable rational decision making? Supposing that is not theright way for us, how then does accounting dynamism correspond to this situation? We
appear to need further research on the issues mentioned above.

11

Continuity and Discontinuity of Accounting Thought
in New Standards
Hideki Fujii
Kyoto University
This paper aims at inquiring into underlying accounting thought in new standards,
which have been issued as a result of what’s called “Big Bang Renovation of
Accounting System” in Japan since late 1990’s. For this purpose, we take, as criteria todecide their theoretical characteristics, the “Kapitalgleichung,” A－P＝K, formulated
in J.F. Schär [1922], Buchhaltung und Bilanz and the “original equation,” Goods＝Proprietorship, in H.R. Hatfield [1916], Modern Accounting, both of which have been
considered suitable to describe basic idea embedded in Japanese accounting tradition.
The new standards show discontinuity of the traditional accounting thought, to theextent that they premise net assets defined as residual amount in the assets of an entitythat remains after deducting its liabilities, while K (Kapital) in Schär’s
Kapitalgleichung, as well as proprietorship in Hatfield’s original equation, is notresidual amount but an independent element presenting abstract total value of theentity’s goods. We can find, in this discontinuity, influence of the asset and liability
view of accounting, which orients current standards setting in FASB and IASB. On theother hand, the new standards keep continuity of the traditional thought in the area of
equity accounting and income determination. They require presenting owners’ equity
as an independent item in net assets section of balance sheet, and determining net
income as change in owner’s equity during a period. In other words, they define net
income as “results of investments” and owner’s equity as net stock of investments
which generates these results. This means that so called “other comprehensive
income,” i.e. window fall to an entity, should be excluded from income as performancemeasure, and that this is consistent to traditional accounting thought formulated in the
Kapitalgleichung and the original equation. Taking all into consideration, we may
conclude that the new standards consist of mixture of two different thoughts ofaccounting, more specifically a kind of nest of boxes where traditional equity
accounting and income determination are covered with soritical structure of elementsof financial statements defined on the asset and liability view of accounting.

12Interaction between Financial and Tax Accountings and
Its Breaking Off
Kazumi Suzuki
Kobe University

This study investigates the historical process of the interaction between accounting
standards and corporate income tax codes, and points out distinctive features andproblems in current accounting practices. Japanese Corporate Income Tax Law has
also accepted the accounting thought including the historical cost basis, the accrualbasis and the matching principle, therefore Japanese taxation has harmonized taxable
income assessment with the financial accounting standards until 1998. The tax
amendments since 1998 which have oriented to past and organizational allocations andthe settings of new accounting standards around 2000 as a part of international
convergence of accounting standards which have oriented to future and market
mechanism, however, have induced mixed situation in accounting practices. In someareas, both the accounting standards and the tax codes have specific rules and theircontents differ. In another, both the accounting standards and the tax codes havespecific rules and their contents are almost the same. And in the other areas, there are
specific rules in the tax codes but the simple or no accounting standards so that the tax
rules are likely to work as de facto accounting standards in these areas. This situation
makes the characteristic of reporting income ambiguous because the reporting income
consists of both elements reflecting the past and organizational allocations and thefuture and market mechanism.

13

Efficiency and Equity of Financial Reporting
Kazuyuki Suda
Waseda University
This study investigates the efficiency and equity of financial reporting regulated by
the government. The efficiency of financial reporting is defined to produce anddistribute efficiently information relevant for securities valuation in the securities
market. The equity is defined as equality of opportunity to access to information
relevant for asset valuation in the securities market (Lev, 1988). While there is a vast
literature on the relevance and usefulness of accounting information in Japan and thesestudies are related to maintain the efficiency of financial reporting, very few empiricalliteratures on the equity of financial reporting or symmetric distribution of accounting
information across investors is in Japan. This study suggests that it is necessary for us
to investigate more the equity of financial reporting because systematic and large
information asymmetries lead to high transaction costs, bid-ask spread, and lower
liquidity of securities resulting from the defensive measures taken by uninformed
investors who perceive significant inequity. For example, an extensive literature has
accumulated on the economic consequences of Regulation Fair Disclosure in the U.S.
Bailey et al.(2003) found that the quantity of voluntary earnings disclosure andabnormal trading volume increased after Regulation Fair Disclosure. Ahmed etal.(2007) documented that Regulation Fair Disclosure had reduced differences in
information quality between investors prior to quarterly earnings announcements. We
need more empirical research to judge the level of the equity of financial reporting inJapan.

14

2007 Annual Conference of JAA
Plenary Session 2 :Management Accounting as Management Systems

A Formation of Management Accounting in U.S. Big Business
Shinichi Korogi
Kurume University
In this particular study, working on the first resources, how management accounting
has been formatted based on return on investment was examined from management
system perspectives.
Before developing a theory, first we need to confirm what ought to be a fact.
Recognizing it correctly ensures ways of developing a persuasive theory.
As a result of exploration, I found that choosing a railroad route is recognized as adecision making activity and that a budgeting and a timetable control are considered
as an evaluation activity in the American railroad companies in the middle of 19th
century. And these activities are functioned on return on investment.
As seen in ways of choosing a railroad route developed by the American railroad
companies in the middle of the 19th century, decision making activity such as fund
distribution by the top management impacted on how to structure an appropriation
system for a strategic planning of the E.I du Pont de Nemours Powder Company in theearly 20th century.
It is also suggested that management was organized with a strategic planning activity,
a management control activity, and an operational control activity in the E.I du Pont deNemours Powder Company in the early 20th century, and that management accounting
on return on investment had been developed to support these activities.

15

Japanese Corporations' Organizational Principles and Management
Control: A study based on R. N. Anthony's theoretical framework
Eri Yokota
Keio University
This study first looked at R. N. Anthony's management theory as a typicalmanagement control theory. It is recognized that Anthony’s theoretical framework isunderpinned by a set of organizational principles. This study examined what kind ofchanges this theoretical framework needs to undergo today. It then investigated thecharacteristics of the organizational principles underlying Japanese corporations andthe style of management control adopted by them. In a detailed analysis, it compared
the organizational principles underpinning Anthony's theory with those of R. Simon's
theory, which characterized this concept as a traditional form of management control.
The study went on to examine the organizational principles underlying Japanese
corporations in the context of the Japanese divisional organization system, which was
highly dependent on management control, and looked into the relationship thoseprinciples had with Japanese-style management control on the basis of the preceding
investigations.
The results showed that, in a Japanese corporation, management control took theform of top management exerting centralized control over the entire organization while
involving middle management and first line management in the process, and that,
despite the corporate organization being based on the division of labor and division of
power, its units were not entirely autonomous. Although a trend has emerged in recent
years to introduce a more decentralized organization based on an autonomous
management system with a view to directly linking remuneration to performance, anadjustment mechanism seems to have been put in place to harmonize it with Japanese
corporations' traditional organizational principles in terms of the involvement of
middle management and first line management, relationship between performance andremuneration, and so on.

16Recognizing the Assimilative Process of the American-Type Cost
Accounting Systems to Our Country
Koji Yamamoto
Osaka Prefecture University
The American-Type Cost Accounting Systems brought a great influence to theimplementation and development of the cost accounting in our country. I show thearguments done in the assimilative process of standard costing to our country. Then, I
recognize the role which a researcher and a man of business in those days played.
Furthermore, I mention the importance of the researcher's role as a facilitator about theimplementation of the new cost accounting or the new theory.
The expression of “the assimilative process” means that the adaptation as a systemof our country is made. As for the assimilation of the standard costing, the influence of
the activities in the business world was strong in addition to the researcher's activities.
A man of business tried to learn and exchange information for actively.
On the other hand, the academic dispute over the concept of the standard cost was
seen. It is important that there was a difference in the opinion about the role of theresearcher and a man of business in that background. Moreover, at the dispute over the
relation between the standard costing and the budget, a man of business threw a doubt
on the popular view of the researchers, and the researcher showed the understanding asa result of the dispute.
The researcher must take the needs of the business and the effective way of
researching. The case studies and especially the action researches are necessary so thata researcher may play a part as a facilitator of restructuring the theory.

17

2007 Annual Conference of JAA
Plenary Session 3:
Transformation of Profit Information and Ideal Way of Financial
Statements Audit

The Fundamental Problems in the Financial Statements Audit Arisingfrom the Change of Earnings Information
Takatoshi Hayashi
Kwansei Gakuin University
It seems that earnings information, which means information about net income andits calculation process, has changed in quality and quantity in the recent decade.
Change in quality means uncertainty and subjectivity included in the earnings
information is increasing. Some of the accounting standards such as standard for
impairment of assets or postretirement benefits require management to makeaccounting estimates to prepare financial statements. Financial statements audit isexpected to provide reasonable assurance, a high level of assurance regarding thereliability of financial statements. The quality of earnings information affects the levelof assurance provided by financial statements audit. Other things being equal, the levelof assurance depends on quantity and quality of audit evidence. As the uncertainty andsubjectivity that accounting information includes becomes higher, auditors will not rely
on corroborative evidence but will rely on persuasive evidence, so the level ofassurance becomes relatively low. Based on such an understanding, the following
points were discussed. Is reasonable assurance the appropriate level of responsibility
for auditing certain accounting estimates? Should the auditor's reporting model berevised to provide different levels of assurance on different parts of the financial
statements? Should auditor's viewpoint be built into accounting standards setting
process in order to maintain relatively high level of assurance?

18

Concept of Earnings Quality and Meanings of Audit
Yukiharu Kurokawa
Keio University“The quality of earnings” or “earnings quality” is commonly dealt with in thecontext of “different corporate values for the same reported earnings” which depends
upon whether the company’s earnings quality is high or low. When one begins to thinkcarefully about how to define the constituent elements in earnings quality, i.e., what
factors will impact the degree of quality, one realizes that the phrase “quality ofearnings” is used rather casually and will differ across the speakers and the purposes.
The concept is both wide-ranging and ambiguous.
First of all, we examine what kind of accounting information is provided and what
factors influence the process of provision, then, we confirm where audit is in it. Second,
we present some tentative ideas for clarifying the concept of earnings quality from theperspective of the accounting information provision process and the factors that
influence it. Third and finally, we discuss whether the meanings of audit change
depending upon the different contents of social choice phase and individual choicephase of earnings quality. We also mention the relation between businessactivity-business valuation and demand for audit.
Table 1

Summary of the accounting information provision process and the constructsof earnings quality
1. Social choice（Accounting objectives/policies）
・ Criteria for accounting standards
・ Usefulness of earnings（financial）information（particularly forecasting abilities）
・ Earnings concept
・ Relationship to cash flow
2. Individual choice（Accounting strategy）
・ Accounting guidelines
・ Practice of earnings management（manipulation）（Accounting environment）
・ Reliability of financial data
3. Business activity-business valuation（business environment, business strategy）
・ Sustainability of firm（high degree of continuity in results valuations）
・ Discretion in actual expenses incurred for operations

19

Research Matters of Audit and Assurance Services
Corresponding to Qualitative Change in Profit Information
Fumio Naito
Konan University
I reported on the following seven points. As an assumption of the report, I set thatprofit information means the financial information in which all financial statement
amounts relate to pretax earnings.
1. Has profit information been transformed?
A qualitative characteristic of profit information has changed because of the relative
decrease of the suitability of the accounting standard to the subject of profit
information.
2. How has profit information been transformed?
It is judged that the level of the characteristic of "Reliability" as a qualitative
characteristic of profit information has relatively decreased more than the level of therise in the characteristic of "Relevance to decision making".
3. Is the change in the characteristic of profit information definite? And does thechange in the characteristic of profit information change the meaning of usefulness as
information for investment decision making?
The change in the characteristic of profit information cannot be asserted to be
definite. However, "Reliability" has decreased while "Relevance to decision making"as information for investment decision making increases. As a result, the meaning ofutility has changed.
4. Can the audit correspond to the transformation of profit information?
The audit of financial statements has the possibility that it cannot necessarily
correspond to the change in a qualitative characteristic of profit information.
5. What problem is thought if the audit cannot correspond to the transformation of
profit information?
When the accounting standard is applied to an individual case, the accounting
judgment increases diversity and the subjectivity. As a result, there is a possibility that20

the change that cannot be allowed in the profit number is caused. It is necessary to feedback the problem of the application of the accounting standard to the accounting
standard setters by making an effort to prove this fact.
6. What strategy should be taken to solve such a problem?
Because the assumption of the audit has changed, it is necessary to change the audit
method, and, to devise the report of the audit opinion.
7. What theoretical correspondence will be needed to assume that the strategy can beachieved?
When the suitability of the accounting standard has decreased, it is necessary todevelop a new audit method that enables to provide a reasonable assurance.

21

Need to Disclose Structured Information and its Auditability
Kenji Shiba
Kansai University
It is widely known that contents of reported profit are changing. But at the sametime, the audit of financial statements has not been able to catch up this process.
Changes have always occurred and it is reasonable that audits require some time toadapt to these changes, which does not mean that audits are not necessary. It is
important that studies on disclosure, accounting and auditing come together to settle
new systems for these fields, in order to build a better society.
Information disclosure may grow unlimitedly, and we cannot expect all to be audited.
Among the disclosed information, some can be structured and easy to understand, likethe information about profits. But others, like the non-financial information about the
management of intellectual capitals, cannot be easily structured or it’s risky to structure.
There is also information that is impossible to be structured.
The difference between auditing and peripheral activities will depend on how much
structured the information is, and the level of auditability. When the understandability
decreases, demands for auditing increase. However, auditing offers decrease due todifficulties in auditability. Here is the auditing paradox. If auditors refuse to performtheir duties due to practical unauditability, peripheral activities will grow instead.
We can explain the auditing paradox as a result of the conflict in the auditors mind
and its inconsistency with their conduct. To corroborate this, Prof. Tomomi Takada andI have performed a “Research on Auditors’ Judgment on Going Concerns”; and asreported, we could confirm those conflicts and inconsistencies. We would like tocontinue with this kind of research, and considering a market oriented auditing, whereaudits provide different levels of certainty for disclosures with different levels of
structured information, coexisting with peripheral activities.

22

2007 Annual Conference of JAA
Special Committee
Research on Business Organization and Management Accounting
Chair: Toshiro Hiromoto
Hitotsubashi University
The research purpose of this committee is to study on business organization andmanagement accounting, focusing on the facts that Japanese management accounting
systems such as target costing and micro profit centers have been created anddeveloped in the different environments and organizations from the ones traditional
management accounting in the U.S. has been based on, and that management
accounting models originated in U.S. have been adapted to Japanese environments andorganizations in their implementation process.
To carry out our purpose, this committee needs to address two issues: one is to trace
the historical process of evolution of management accounting; the other is to explain
the role of management accounting in the modern organizations. The latter issue
consists of concrete attempts to highlight the characteristics of autonomous
organizations, to provide details about the process of establishing a current order ofmanagement accounting in some Japanese and American companies, and to study on
the evolutionary framework to explain the process.
The reason why this special committee focuses on the environmental andorganizational context as the foundation of management accounting is that thiscommittee postulates that the role of management accounting depends on thecompany’s context such as their environment, philosophy, strategy and organizational
form. This promise is in sharp contrast to traditional management accounting researchthat has been guided by the principle of relevance. The analytic framework of ourresearch is shown in the figure below.

23

Management Philosophy

Management System

Business Organization
StrategyManagement Control System
Management Accounting

Business Environment

The key concepts across the various approaches adopted in our research to address
the issues mentioned above are “market-organization interpenetration,”“micro-macro-loop,” and “evolution.” The market-organization interpenetration means
weak linkage between organizational units, called a loose coupling organization, in
which the units or individuals are autonomous and responsive to markets. The
micro-macro-loop that creates the information flow between individuals (micro) andthe whole (macro) is important to make sure that individuals act so as to keep the orderof the organization as a whole. And this committee stands on the evolutionary
approach in which management accounting that is not designed rationally in advancecould work well ex post facto.
Although these concepts have been used in the other area, this committee expanded
and advanced them based on insights obtained by management accounting research inaddition to borrow them. Another characteristic of this committee is that it iscomprised of the following commission members who have various research careers.
That variety enabled this committee to include different perspectives such as historical,
evolutionary, theoretical and empirical approaches under the common framework.

24Commission members:
Hiromoto, Toshiro, chairman (Hitotsubashi University)
Hiki, Fumiko (Hitotsubashi University)
Ito, Katsuhiro (Seikei University)
Kawada, Makoto (Meijo University)
Kimura, Shogo (Nagoya University)
Morofuji, Yumi (Okayama University)
Nakagawa, Masaru (Doshisha University)
Nishimura, Yuko (Aoyama Gakuin University)
Obata, Hiroshi (Hitotsubashi University)
Sawabe, Norio (Kyoto University)
Torii, Hiroshi (Meiji Gakuin University)
Yokota, Eri (Keio University)
Research collaborator:
Fujino, Masafumi (Nihon University)
Kataoka, Hiroto (Oita University)

Special Committee
The comprehensive research on accounting-based firm valuation
Chair: Hisakatsu Sakurai
Kobe University
The purpose of this special committee is to investigate various issues of evaluating
firm value based on accounting information. In the first year, by extensively reviewing
prior literature, we made the interim report as follows: In the part I, we summarize
studies on the relationship between accounting information and security values and the
purpose of financial reporting in the conceptual framework to define our point of views.
We then discuss the role of accounting information through considering the efficient
market hypothesis and its anomaly and studies in behavioral finance. The part II
includes the topics for price multiple-based valuation methods (e.g., PER, PBR),
discounted present value-based models (such as discounted dividend model,
discounted cash flow model, and residual income model), the method to estimate costof capital (i.e., discount rate), the applicability of residual income model to research on
accounting standards setting, and various attributes of financial performance measures.
In the part III, we discuss (i) the prediction of future earnings based on the25association between corporate strategy and financial performance, and (ii) the role ofaccounting accruals in firm valuation. The part IV includes the topics for valuation ofloss firms and firm valuation in M&A.

Subject Research Committee
Implementation and Development of Cost Accounting
in Our Country: Literature Historical Research;
Interim Report on Cost Control Function
Chair: Koji Yamamoto
Osaka Prefecture University
The purpose of this Subject Research Committee is to examine issues that werediscussed concerning the implementation and development processes of the costaccounting in our country by comprehensive literature review. Then, we verify
whether a development corresponding to the conditions of our country was formed inacademia. We also investigated what kind of roles academics and business people
played in the development.
We proceed with the research about the standard costing as an accounting for control
function. Prior to the literature review, we divide the following stages as a logicalprocess of the implementation and the development of the cost accounting:"introduction, recognition" stage, the "implementation, reception" stage, and the "active
adaptation" stage.
In interim report, to begin with, we survey a historical background in the period. And
we argue the managerial technique such as time study based on the scientificmanagement, which has been introduced at the early stage of the development. We
also argue a unit calculation of resource as a base of the cost accounting.
Then we take up the various points of arguments discussed over the standard costingand examine a trend about the implementation with the business world. We discussdisputes over two concepts about the basic and the current standard cost and over the
relations between the standard costing and the budget about the control function. So, we
mention view toward the final report.

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Study Group
Changes in Accounting Society and Market Logic
Chair: Yukiharu Kurokawa
Keio University
The issues underlying this theme are as follows:1.

Accounting Measurement and capital market quality
Usefulness of accounting information is usually verified by statistically measuring
the impact of accounting information on stock markets. However, a question arises
whether the quality of a market itself can be an issue or “if the nature of accounting
information should change according to the level of market quality.” In chapters 1, 2
and 3, we logically consider the relationship between earnings quality (contents on
disclosure) and market quality. Chapter 4 shows results of a questionnaire concerning
financial reporting of listed companies in emerging equity market.
2.

Valuation models of enterprises and reactions by markets
A theoretical figure of corporate value that individual investors perceive of thecompany they may invest in is created based on the combination of a corporate
assessment model and information required by the model. It is necessary to identify the
corporate assessment models that are actually used in the market. Chapters 5 and 6
introduce empirical research about market reactions to managements’ earnings forecast
and about the relationship between reliability of financial reporting and pricing of newissues.
3.

Change the nature of accounting profession and management of auditing firms
Focusing on the shift of the nature of accounting profession from specialist to
manager and employee, in other words, the disappearance of the accounting profession,leads us to raise a research question to “examine management of audit firms.” Chapter
7 show results of a questionnaire concerning organizational culture in accounting
firms.
4.

Adaptation of corporate accounting techniques among public sector and its impact
Corporate accounting systems have been introduced into public sector. Chapter 8reports implications of questionnaire responses from local governments.

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Contents of the final report：
Chapter 1 Quality of Earnings and Inefficient market
Yukiharu Kurokawa , Keio University
Chapter 2 Quality of Earnings Based on the Concept of “Released as Business Risk”
Yuko Katsuo, Gakushuin University
Chapter 3 Some Inquiries into the Market Regulations and the Disclosure Rules : theDevelopment of the Emerging Equity Markets in Japan
Mitsuru Tagaya, Aoyama Gakuin University
Chapter 4 A Questionnaire Concerning Financial Reporting of Listed Companies in
Emerging Equity Market in Japan
Yusuke Nakajo, Yokohama City University
Yoshiko Sato, Japan investor Relations Association
Chapter5
Market Reactions to Management Earnings Forecast: Effects of
Expectation and Earnings Management
Takashi Asano, Aichi Shukutoku University
Chapter 6 Reliability of Financial Reporting and Pricing of New Issues in Japanese
Capital Markets
Akira Usui, Waseda University
Chapter 7
A Questionnaire Concerning Organizational Culture in Accounting Firms
Takashi Nagami, Keio University
Koji Oyanagi, Senshu University
Chapter8
Initiatives of Change in Governmental Accounting - Implications of
Questionnaire Responses from Local Governments in Japan
Shigeru Ohtsuka, Chiba University

Study GroupA Study on the International Movements of Environmental Financial
Accounting and its Basic Concepts
Chair: Masao Kawano
Chuo University
The objective of this study is to examine possibility of environmental financial
accounting and its directions in Japan. Environmental financial accounting can be
defined as an area of accounting for the environment within the framework of financial
accounting. Firstly, to examine possibility of environmental financial accounting, westarted the study by surveying existing theories, regulations and praxis of28

environmental financial accounting studied by international institutions andprofessional accountants’ bodies of western countries. Secondly, we conductcomparative studies by clarifying basic concepts underlying the theories, regulations
and praxis of western environmental financial accounting. We publish an interim reportof the study this year.
Based on the Fourth Assessment Reports of IPCC (Intergovernmental Panel on
Climate Change), it is said that more strict countermeasures in fighting against the
global warming are needed. It is also mentioned that, corporations will have to pay
more costs for activities that reduce environmental burdens. However, while
disclosures of environmental accounting information have been increasing among
Japanese companies after the publication of the Ministry of the Environment’s
Guidelines of Environmental Accounting, only a little environmental accounting
related information have disclosed on financial statements except for costs or liabilities
related to soil contamination and/or abatement of asbestos. We believe that addressing
more environmental matters in financial statements is important.
Studies in the area of environmental financial accounting have initiated byinternational institutions such as United Nations, European Commission and otherprofessional accountants’ bodies (such as FEE and CICA) through 1990s. In addition,
new accounting standards and related interpretations for environmental issues havebeen set by the FASB and IASB since 2000. We paid close attention especially to theaccounting for asset retirement obligations. W e examined financial influences of the
FAS 143 “Accounting for Asset Retirement Obligations” to the U. S. corporations andconsidered possible problems to practices of Japanese corporations.
We also addressed the accounting for emission rights. We examined international
and Japanese accounting standards related to emission rights and clarified present stateof accounting procedures and disclosures of emission rights through some case studies
of corporations.
In order to complete a final report of our study group, remaining issues that need to
be examined are listed below;(1) To continue studies of topics examined in the interim report,(2) To summarize theoretical characteristics of environmental financial accounting,(3) To place environmental financial accounting from the viewpoints of financial
accounting theory, and(4) To clarify problems related to environmental financial accounting in Japanesesocial and economic context.

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Study GroupCalculate Regulations of Companies Act
Chair: Masamich Yoshioka
Tokyo University of Science
Vice-Chair: Motonobu Tokumae
Fukui Prefecture University
Vice-Chair: Akiko Sugiyama
Toyo University
The purpose of this study is to investigateａposition of “Calculate Regulations ofCompanies Act” among the so-called “Triangle system”. We consider “Calculate
Regulations of Companies Act” from three viewpoints as follows.
1. A position of accounting standards against “Calculate Regulations ofCompanies Act”
At the bottom of income statement, net profit or loss is shown. On the other hand, it
is not shown in the balance sheet. Net profit or loss is also shown in the statement ofchanges in stockholders’ equity as one of the items of accumulated earnings.
2. A position of Audit against “Calculate Regulations of Companies Act”
Entry items of auditor’s report on accounting documents are regulated in Corporate
Calculate Regulations, not in the body of Companies Act.
Auditor’s fair opinion corresponds with the auditor’s opinion that is based on Financial
Instruments Transactions Law. The auditor’s fair opinion is based on auditing
standards. Auditors can enunciate “the auditor’s fair opinion with qualifications” aswell as “not enunciated auditor’s opinion” or “irrelevant auditor’s opinion”.
3. A position of Income Tax Law against “Calculate Regulations of Companies
Act”
Income Tax Law respects accounting standards and follows the definite settlementof accounts. Income Tax Law adjusts net income before income taxes to calculate
taxable income. Income Tax Law related to provisions for calculation of dividend of
surplus was revised. The new Companies Act admits several dividend of surplus during
a single accounting period as well as in the resolve of regular shareholders’ meeting.
So far we have outlined Calculate Regulations of Companies Act from the three
viewpoints mentioned above. The study group members’ comments on the “Triangle
System”
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2007 Annual Conference of JAA
Regional Reports
Hokkaido Region
Yuji Yoneyama
Hokkaido University
The Hokkaido regional meetings were held in 2007 as follows:
1. The 71st Regional Meeting at Kushiro Public University of Economics on June
2nd, 2007.
(1) “Analysis of Accounting Standards and Tax Regulations on Corporate
Reorganizations in Japan,” Hiroshi Taira, Hokkai-Gakuen University.
(2) “Corporate Disclosure in the Securities Acts,” Jun Hiyama, Sapporo University.
(3) “Reciprocity Principle Built in Japanese Management Accounting,” Okihiro
Maruta, Hokkaido University.
2. The 72nd Regional Meeting at Hokunoukenpokaikan on November 17th, 2007.
(1) “A Study of the Linkage between Cost Improvement and Profit Management,”
Akira Maeda, Otaru University of Commerce.
(2) “(3) “The Exclusion of Expenses Related to Remuneration of Executives of"Individually Controlled Family Corporations" When Making Tax
Assessments,” Shigeyuki Nakashima, Hokkai School of Commerce.
(3) “Short-term Income Determination and Cost Accounting in German-speaking
Countries,” Satoshi Imamura, Hokkai-Gakuen University.
(4) “Some Notes on the Datini Ledgers,” Yoshiharu Fukushima, Hokkaido
Information University.
A lively discussion was held among the participants in each presentation.

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Tohoku Region
Yoshio Hosaka
Tohoku Gakuin University
The Tohoku Region of the Japan Accounting Association covers the north eastern(Tohoku) area of the main land. During 2007, following two meetings were held.
1. The 72nd Meeting at Niigata University on May 26th, 2007.
(1) “On Empirical Research on the Keeping and Using of Accounting Data in
Smaller Companies in the Ishinomaki Area,” Hidetaka Fujiwara, Tohoku
University.
(2) “The Framework and Practices of Business Process Management,” Gunyung
Lee, Niigata University, Naoya Yamaguchi, Niigata University, Yoko Ogushi,
Niigata University.
2. The 73rd Meeting at Hirosaki University on November 11th, 2007.
(1) “A Study on the Environmental Accounting Model for Biomass Policy andProject in the Area of Woodland,” Masanao Kanetoh, Hirosaki University.
(2) “The Present State and the Issues of the Bookkeeping Class as Introductory
Educations,” Shingo Sekine, Ishinomaki University.

Kanto Region
Takaaki Kikui
Sophia University
The 55th regional meeting was held at Sophia University on December 15th, 2007.
The main theme of the meeting was “A Role of the Non-financial Information in
Business Accounting.” Discussions were coordinated by Yoshikuni Hirose, Waseda
University.
Following reports and panel discussions were presented.
(1) “Accounting Measurement Systems and the Disclosure of Non-financial
Information,” Keiko Kitamura, Chuo University.
(2) “Summarization-Process Information and Non-financial Information New Costand Revenue Accounting Provides - Possibilities of XML-based Cost andRevenue Accounting - ,” Hiroshi Obata, Hitotsubashi University.
(3) “A Mandatory CSR Reporting Clause of the New UK Company Law,”
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Yoshinao Kozuma, Sophia University.
(4) “The Coverage and Level of Assurance over Expanding Business Reporting,”
Shinji Hatta, Aoyama Gakuin University.

Chubu Region
Akihiro Noguchi
Nagoya University
1. The 114th Chubu Regional Meeting was held at Yokkaichi University on May
12th, 2007.
(1) “Case Study on the Introduction of Accounting Information System ofConsumer Financing Company,” H. Nakano, Nagoya University Ph.D. student.
(2) “Empirical Research on the Ability of Accounting Earnings to Predict Future
Cash Flows,” I. Ogata, Koryo International College.
(3) “Accounting Professions in Canada,” M. Matsuwaki, Yokkaichi University.
2. The 115th Regional Meeting was held at Nagoya University on July 10th, 2007.
(1) “Tax Effect Accounting for Stock Options,”K. Yamashita, Nagoya University
Ph.D. student.
(2) Panel Discussion: Accounting Professions and Academics, A. Noguchi, Nagoya
University, J. Yamada, N. Hattori, Tokai Chapter of JICPA.
3. The 116th Regional Meeting was held at Aichi Gakuin University on December
8th, 2007.
Theme: Changes in Accounting Thought and Business Accounting
Moderator: Hirano, K. (Aichi Gakuin University)(1) “Research on the Adaptability of IAS/IFRS in Developing Countries,” M.
Hiraga, Aichi Gakuin University.
(2) “Revenue Recognition Criteria and Fair Value Measurement,” T. Tashiro, Meijo
University.
(3) “Ensuring the Reliability of Financial Information,” Y. Yoshida, Chukyo
University.
(4) “Toward Accounting for Investment Decision Making,” T. Ito, Tokai Chapter of
JICPA.
http://www2.soec.nagoya-u.ac.jp/%7Enoguchi/chubu/english.htm

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Kansai Region
Toshio Ohno
Kobe Gakuin University
The 57th Kansai Regional meeting was held at Kobe Gakuin University (their new
Port Island Campus in Kobe) on December 8th, 2007. The main theme of the meetingwas “The “Raison Deter” of GAAP – Consensus and Reliability” and following threepresentations, moderated by Hideki Fujii, Kyoto were delivered in the main session:(1) “Convergence of Accounting Standards,” Tokuei Sugimoto, Kwansei Gakuin
University.
(2) “Internal Control Audit – New Horizon,” Humio Naitou, Konan University.
(3) “A New Integration or Disintegration of Financial and Management
Accounting, ” Toshihumi Matsumoto, Doshisha University.
Before this main session, a special session titled as “Issues related to SME
Accounting in Japan” was moderated by Teruyuki Kawasaki, Konan University. Two
tax accountants (Mr. Sakamoto and Mr. Ueda) were invited as guest speakers and they
made special reports.

Kyushu Region
Chikako Ozu
Kyushu University
The Japanese Accounting Association (JAA) Kyushu regional congresses are
regularly held two times a year – in August and March. The committee decided toorganize the 80th co-memorial congress and Kyushu University was selected as avenue. Early spring congress was assembled at Saga University. The title, name of thepresenters at each of the meetings are shown below:
1. The 80th meeting held at Kyushu University, on August 4th, 2007.
(1) “The Trend and Issues on CSR Accounting: In Respect of Japanese andInternational Circumstances,” Kosuke Miyaji, Nagasaki Prefectural University.
(2) “On the Generation of Management Accounting as a means of Management
System,” Shinichi Korogi, Kurume University.
(3) “Trust Accounting and Its Taxation: The Tax Treatment of Pass-Through and Its
Practical Implication,” Hideo Suenaga, Kumamoto Gakuen University.
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(4) Memorial Lecture: “The JAA Kyushu Regional Congress: Past, Present and the
Way Forward,” Akira Nishimura, Beppu University.
2. The 81st meeting held at Saga University, on March 29th, 2008.
(1) “Consolidation Issue of SPE in Japan,” Cao Yu, Fukuoka University.
(2) “Japanese Management Accounting Fostering Reciprocity Relationship,”Okihiro Maruta, Kyushu University.
(3) “For an Investigation into Auditing to Self-Governing Body: On an Opportunityof Enforcement of Local Governmental Financial Sound Law,” Tatsumine Ito,
Seinan Gakuin Univerisity.

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