March 3, 2008 (No.1)

Contents
1.

Foreword: Launch of Newsletter

2.

Information on the Accounting Standards Board of Japan (ASBJ)
1)

Development of the ASBJ Standards (December 2007 -January 2008)

2)

Events (December 2007 -January 2008)(1) Announcement of New Project Plan(related to Convergence)(2) Launch of New Technical Committees, etc.
(3) ASBJ Chairman Ikuo Nishikawa attended CESR Open Hearing(4) ASBJ Chairman Ikuo Nishikawa participated in Japan Securities Summit inLondon as a Panel Member

3.

3)

Overview of the ASBJ Meetings (142nd meeting - 145th meeting)4)

Progress of Projects (As of February 1, 2008)

Information on the Financial Accounting Standards Foundation (FASF)
1)

FASF Seminar “Points to be Heeded when Preparing a Report on First Quarter ending
June 30, 2008”

4.

Notice1. Foreword: Launch of Newsletter

feedback regardless of whether it is critical

Activities at the Accounting Standards

or supportive.

Board of Japan (ASBJ) and the Financial

As one of the means to achieve this, we

Accounting Standards Foundation (FASF)

have launched the Newsletter to actively

are becoming broader than before, as thedisseminate information from our side.

trend

of

This newsletter will be issued every second

isgatheringmonth initially, primarily for the purpose of

momentum on a global scale.

Accordingly,

providing a brief explanation of ourit has become increasingly important for us

activities. We hope you will enjoy reading

to gain the understanding of as many people

the Newsletter in the years to come.

towards

accounting

thestandards

convergence

as possible about our activities, and get theirpg. 1
Copyright© ASBJ/FASF All Rights Reserved.

2. Information on ASBJ

Exposure Draft was February 25.

1) Development of ASBJ Standards (released
between December 2007 and January 2008)(5) [DP] Release of Issue Paper on Accountingfor(1) [Final] Announcement of Accounting

ResearchandDevelopment

Costs(December 27, 2007)

Standard for Construction Contracts (ASBJ

The deadline for public comments on theStatement

No.15)

Exposure Draft was February 4.

AccountingStandard

Contracts

(ASBJ

and

GuidanceforonConstruction

Guidance

No.18)(December 27, 2007)(6) [DP] Release of Issue Paper on Accountingfor Business Combinations (December 27,
2007)(2) [Final] Amendment of Guidance on
Accounting Standard for Impairment of Fixed

The deadline for public comments on the
Exposure Draft was February 4.

Assets (ASBJ Guidance No.6) (January 24,
2008)[Legend](3) [ED] Release of Exposure Draft of

DP: Issue Paper, Discussion Paper
ED: Exposure Draft
Final: Statement/Guidance, etc. (final version)

Accounting Standard for Asset Retirement
2) Events (December 2007 -January 2008)
Obligations(ASBJ

Exposure

Draft

of

Statement No.23) and Exposure Draft of(1) Announcement of New Project Plan
Guidance on Accounting Standard for Asset(related to Convergence) (December 6,
Retirement Obligations (ASBJ Exposure
2007)
Draft of Guidance No.27) (December 27,
ASBJ, which works on the initiatives toward
2007)
international

convergenceofaccounting

The deadline for public comments on thestandards, announced the new Project Plan in
Exposure Draft was February 4.
consideration

of

the

Tokyo

Agreementreached with the International Accounting(4) [ED] Release of Exposure Draft ofStandards Board (IASB) last August (theGuidance on Determining a Subsidiary andprevious Project Plan was announced on
an Affiliate (ASBJ Exposure Draft ofOctober 12, 2006).
Guidance No.28) (January 24, 2008)
The Project Plan classifies the project items
The deadline for public comments on the
pg. 2March 3, 2008 (No.1)

into

three

categories(short-term,

Committee of European Securities Regulators

medium-term and medium & long-term) and(CESR) in December 2007 titled “CESR’spresents the schedule in more specific terms

advice on the equivalence of Chinese,

according to the Tokyo Agreement.

Japanese and US GAAPs”, held at the CESR
office in Paris on January 21, 2008.
At the open hearing, Mr. Nishikawa(2) Launch of New Technical Committees,etc.

commented that he appreciated the CESR for

ASBJ has established the following three

regarding

new technical committees as part of its efforts

Accepted Accounting Principles (GAAP) isto accelerate the convergence of accounting

considered to be equivalent to International

standards.

Financial Reporting Standards (IFRS) based

9

Technical Committee for Investment

on an holistic approach, that ASBJ is working

Propertyon Project items relating to equivalence

9Technical

Committee

forFinancial

Statement Presentation
9

Technical

Committee

working

Japanese

Generallyassessment by the EU based on the Projectfor

Revenuehighest priority, and that ASBJ will be fully

involved in the discussion from early stages

ASBJ

group

the

Plan announced in December 2007 as a

Recognition
Furthermore,

that

has

to

established

start

a

consideringwith respect to projects

Memorandum of Understanding between

discussions held between IASB and the

IASB and FASB.

Financial

CESR

AccountingStandards

relating to theBoardinvitedcomments

on

the(FASB) about reconsidering liabilities andConsultation Paper until (Monday) February

equity distinctions.

25.

(3)

ASBJ

attended

Chairman
Open

Ikuo

Hearing

Nishikawa
on

CESR

(4)

ASBJ

Chairman

Ikuo

Ishikawa

participated in Japan Securities Summit inConsultation Paper “CESR’s Advice on the

London as a Panel Member

Equivalence of Chinese, Japanese and US

The Japan Securities Summit, co-organized

GAAPs”

by the Japan Securities Dealers Association

Chairman Ikuo Nishikawa and other ASBJ

(JASDA) and the International Capital

members attended an open hearing on aMarket Association (ICMA), was held in

consultation

London on January 21 and 22, 2008 for thepaperpublished

by

the

pg. 3
Copyright© ASBJ/FASF All Rights Reserved.

purposeofcapitalstandards were made in the form ofmarkets.

The Summit, headed by Prof.

“Accounting Big Bang” in the late 1990s.

Heizo

promotingTakenaka,

Japanese

Keio

University,was9

Current

statusofequivalence

unprecedented in terms of scale as a

assessment by the EU, which was one of

securities industry’s event in Europe, as many

the triggers of the Convergence Project

representatives of leading companies andwith IFRS launched in March 2005.

organizations of capital markets were invited9

as speakers and panel members.

reachedThe program was wide-ranging, spanning

explanation of the current progress of thefrom macro-level themes relating to Japanese

Project.

capital markets to subject-specific themes.

9

On the second day, a panel discussion on

high-quality

Japanese

entitled

namely: value relevance, which is useful“Japanese Accounting Standards - Efforts

for investors to predict future cash flows;

toward international convergence” was held.

full disclosure of financial risks; andThe panel discussion was moderated by Prof.

coordination with market regulations.

Tomo Suzuki, University of Oxford. Mr.

The panel discussion attracted more than 100

Nishikawa and Mr. Seiichi Kaneko, Director

people, who listened eagerly to the panelof the Security Analysts Association of Japanmembers(SAAJ) participated as panel members.

question-and-answer session.

In the panel discussion, Mr. Nishikawa gave

event helped Europeans understand the current

a presentation on the following.

situation of Japanese accounting standards.

9

accounting

standards

As convergence efforts, ASBJ aims todevelop Japanese accounting standards
that would eliminate differences withIFRS and converge them with IFRS rather
than adopting IFRS, and is making
contributions to the development of IFRS.
9As Japanese capital markets became

increasingly

globalized,

harmonization

with international accounting standards
and improvements in Japanese accounting
pg. 4

Overview of the Tokyo AgreementinAugustExplanation of

and

2007

three

accounting

took

part

and

factors

anofstandards,

ina

We believe thisMarch 3, 2008 (No.1)

3)

Overview

of

the

ASBJ

Meetings

another company.

(December 2007—January 2008)(2) 143rd Meeting (held on December 20, 2007)(1) 142nd Meeting (held on December 6, 2007)
a.
b.

c.

d.
e.

f.

Project Plan
Progress of Studies conducted byTechnical Committee for Construction
Contracts
Progress of Studies conducted byTechnical Committee for Asset Retirement
Obligations
Progress of Studies conducted by
Intangible Assets Technical Committee
Progress of Studies conducted byTechnical Committee for Business
Combinations
Progress of Studies conducted byTechnical Committee for SPEs

a.

b.

c.

d.

a. The Board approved the announcement ofe.

the Project Plan showing the convergencef.

schedule for 2008 onwards.

The Project Plan

presents the schedule by classifying the Project
items

into

three

categories(short-term,

medium-term andmedium &long-term)

according to the Tokyo Agreement.

For items

relating to equivalence assessment by the EU,
the development of standards is mostly
scheduled to be completed by the end of 2008,g.

Accounting Standard for Construction
Contracts and Guidance on AccountingStandard for Construction Contracts[Resolution for public release]
Exposure Draft “Accounting Standard for
Asset Retirement Obligations” andExposure Draft of Guidance on
Accounting Standard for Asset Retirement
Obligations [Resolution for public
release]Issue Paper “Issue Paper on Accounting
for Research and Development Costs”[Resolution for public release]
Issue Paper “Issue Paper on Accountingfor Business Combinations” [Resolution
for public release]
Amendment of Guidance on AccountingStandard for Impairment of Fixed Assets
Progress of Studies conducted byTechnical Committee for SPEs
Establishment of Technical Committee forInvestment Property

a. The Board approved the release of an
accounting

b. - e. The Board had wrap-up discussions on
the drafts of the final documents to be approved

andguidancefor

construction contracts. It provides that thepercentage of completion method should apply
when the outcome is deemed certain during theconstruction process (if total amount ofconstruction

excluding some items.

standard

revenues,

totalamountofconstruction costs and the construction progressat the closing date can be reliably estimated)
and the completed contract method shouldat the next meeting.
f. The Board discussed the treatment offostering

investment

purposes

and

debt

collection

purposes

in

where

the

cases

investments made in multilayered structure,that is, where the investee company invests inapply when those conditions are not satisfied.
b. The Board approved the release of an
exposure draft proposing to require recognitionof asset retirement obligations as liabilities andthe corresponding amount as an addition to thecost of plant, property and equipment.
pg. 5

Copyright© ASBJ/FASF All Rights Reserved.

c. The Board approved the release of an issued.

paper covering the topics of “research ande.

development subject to issue paper”, “treatmentofin-housedevelopment

expenses”,

and“treatment of research and development inprocess acquired by business combination, etc.”
d. The Board approved the release of an issue
paper covering the six topics in the “Research
Reporton

AccountingforBusiness

Combinations”, including the abolition of thepooling-of-interest method.
e. Explanation was provided regarding theamendment of the Guidance on AccountingStandard for Impairment of Fixed Assets in
response to the abolition of the optional
treatment similar to operating leases for financeleases.
f. Establishment of the Technical Committee
for Investment Property was reported, together
with its planned subjects, including studies
about the pros and cons of disclosing the fairvalue of investment property, the scope(definition) of investment property and themethod of calculating fair value.

Progress of Studies conducted by Segment
Reporting Technical Committee
Progress of Studies conducted byTechnical Committee for Inventories

a. The Board approved the release of the
Guidance bypassing the exposure draft stage,
because it is a purely technical amendment tocomply with changes in other AccountingStandards.
b. The Board approved the release of the
Exposure Draft “Guidance on Determining a
Subsidiary and an Affiliate” which sets forth
the treatment of shareholdings for fostering
investment or debt collection purposes.
c. Approaches pursued in the TechnicalCommittee were explained. Treatment ofchanges in segmentation and reporting of
discontinued operations are planned to bedeliberatedin

separate

futurephases.

Modification of the definition of “accounting
policies” is considered so that “method ofpresentation” would be separated from it.

Inaddition, the consensus of the TechnicalCommittee was that “changes in accounting
estimates” would not be retrospectively applied
to financial statements for prior years.
d. The Technical Committee is conducting(3) 144th Meeting (held on January 17, 2008)
a.

b.

c.

Amended ASBJ Guidance “Guidance on
Accounting Standard for Impairment of
Fixed Assets” [Resolution for public
release]Exposure Draft “Guidance on Determininga Subsidiary and an Affiliate” [Resolution
for public release]
Progress of Studies conducted byTechnical Committee for Retrospective
Application

pg. 6

studies with the view of adopting themanagement approach to segment reporting.
The Board had discussion of the “possibility ofencumbering business activities of the reporting
entity”, which is often cited as a shortcoming of
the management approach. In addition, theMarch 3, 2008 (No.1)

treatment of transactions between segments

segment

which are aggregated into the same reporting

argument about the concern about possibility ofsegment was discussed.

encumbering business activities, correspondinge. The Technical Committee is conducting

to comments on the Exposure Draft.

studies based on the results of a survey on thec. The Technical Committee is conducting

treatment of the last-in-first-out (LIFO) method

studies with the view of abolishing LIFO.

in Japanese GAAP, IFRS and U.S. GAAP. The

The Board discussed the pros and cons of LIFO

progress of the studies was reported and theand the measures that would become necessary

Board had discussion about it.

if LIFO is abolished.

profitandsegment

assetsandd. - e. The establishment of new Technical(4) 145th Meeting (held on January 31, 2008)

Committees was reported.

a.

Committees

Progress of Studies conducted by Practical
Solutions Standing Committeeb. Progress of Studies conducted by Segment
Reporting Technical Committeec. Progress of Studies conducted by TechnicalCommittee for Inventories
d. Establishment of Technical Committee forFinancial Statement Presentatione. Establishment of Technical Committee for
Revenue Recognition

are

aimed

Both Technicalatdealingwith

convergence issues.

a. Regarding the Exposure Draft for unificationof accounting policies of associates, publiccomments and the plan of how to deal withthem were reported.

Given that it is often

difficult to unify the accounting policies at the
level

of

the

investees’

non-consolidated

financial statements, in the cases of associates,
the Board decided to provide that adjustments
for unification of accounting policies should bemade in the process of application of the equity
method if accounting policies are not unified at
the level of the non-consolidated financial
statements of the investees.
b. The Board reviewed the draft of the final
standards, mainly regarding clarification of
pg. 7
Copyright© ASBJ/FASF All Rights Reserved.

4)Progress of Projects（related to convergence)

As of February 1

2007
Q4

2008
Q1

Q2

2009
Q3

Q4

H1

H2

1. Items advised by CESR for EU equivalence assessment purpose (short-term)
Business Combinations(STEP1)
Pooling-of-interest method

RR/DP

ED

Final

Others

RR/DP

ED

Final

ED

Inventories（LIFO）

Final

Uniformity of accounting
ED

Final

Intangibles (R&D expenses)

DP

ED

Construction contracts

Final

Asset retirement obligations

ED

policies(Associates)
Impairments of fixed assets

Retirement benefits

Final

Final
ED

Final

Disclosure of FV information of

Finalfinancial instruments

Investment property

TC

ED

Final

2. Items remaining differences between Japanese GAAP and IFRSs except above
Segment reporting(medium-term)

FinalBusiness Combinations（STEP２)
Issues for PHASE2

ED

Amortization of goodwill

ED

Retrospective restatement
Change in accounting policy

（DP)

ED

Final

Depreciation method

（DP)

ED

Final

Discontinued operations
3.Items related MOU between the IASB and the FASB (medium and long-term)
Scope of consolidations

DP

Financial statement presentation

TC

DP

Revenue recognitionTC

DP

Liabilities and equity distinctions

WG

Financial instruments【Legend】
WG Launch of Working GroupTC Launch of Technical Committee
RR Research Report
DP Issue Paper, Discussion Paper
ED Exposure Draft
Final Standards/Guidance (Final Version) Italic face describes done events

pg. 8

DP

March 3, 2008 (No.1)

3.

Information on FASF

Contracts and Guidance on Accounting1) FASF Seminar “Points to be Heeded whenStandard for Construction Contracts, etc.

Preparing a Report on First Quarter ending

4) Information on International Affairs: Report

June 30, 2008”

on 7th Three Countries (China, Japan and

A new quarterly reporting system will be

Korea) Accounting Standard Setters Meeting,introduced

etc.

with

respect

tofiscalyears

commencing on or after April 1, 2008.

In

Please consider subscribing to the journal. To

conjunction with this, FASF holds a seminar on

subscribe, click here. (we are sorry but the“Matters to be Heeded when a Preparing

information is available in Japanese only)

Report on First Quarter ending June 30, 2008”.
At the same time, ASBJ holds a briefing
session on “ASBJ’s Recent Activities andOverview of Quarterly Accounting Standards”.
As this is the first seminar on quarterly reports,
it is held earlier than usual conventionalseminars on securities reports, etc.
The seminar is held in Osaka, Tokyo, Nagoya,“ASBJ Newsletter”(No. 1)

Takamatsu, Kanazawa, Sendai, Hiroshima,
Sapporo and Fukuoka, from February 26.

Issued on March 3, 2008
Editor：Akiyoshi Maruyama
The views expressed in ASBJ Newsletter are

4.

NoticeFASF

not necessarily those of the ASBJ or the FASF.

issuesaquarterly

journaltitledThe

AuthorsandPublishers

acceptno“Accounting Standards - Quarterly” for the

responsibility for any loss or damage resulting

purpose of explaining the details of FASF

from reliance on the views expressed herein.

activities, business accounting standards, etc., andreviewing the global trends in accounting andth©Copyright, ASBJ/FASF All Rights Reserved

disclosure. The next issue (20 issue) is due toWeb-site : https://www.asb.or.jp/asb/index_e.jsp

be released on (Monday) March 17 focusing on:

E-mail : publicity@asb.or.jp

1) Feature Article 1: Announcement of New
Project Plan
2) Feature

2:

Round-table

Introduction

of

Talk

Retrospective

Application”
3) Explanation
Accounting

Board of Japan /Financial Accounting Standards Foundation

Article“Towards

Accounting Standards

Fukoku Seimei Building 20F, 2-2, Uchisaiwaicho
2-chome, Chiyoda-ku, Tokyo, Japan(Zip Code:100-0011)

ofReleasedStandardforStandards:

Fax : 03-5510-2712

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pg. 9
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