25th December 2007（Inaugural Preparatory Issue）

Contents¾

ASBJ Project Plan¾

“Toward the Global Convergence”--A Dialogue between Ikuo Nishikawa,
Chairman of the ASBJ (Accounting Standards Board of Japan) and Sir David
Tweedie, Chairman of the IASB(International Accounting Standards Board)¾

MessageAccounting Standards Board (IASB) in

ASBJ Project Plan
The Accounting Standards Board ofAugust 2007. (The previous ProjectJapan (ASBJ) works on the initiatives

Plan was published on October 2006.)

toward international convergence of

The Project Plan, in accordance withaccounting

standards.

6th

the content of the Tokyo Agreement,

December 2007, ASBJ published theclassifies the project items into three

new Project Plan based on the Tokyo

categories (short-term, medium-term

Agreement on achieving convergence

and

of

indicates the schedule for each item.

accounting

announced

As of 6th

Onstandards

jointly

medium&long-term)

with

the

ASBJ

Project Plan（Items related to convergence）

andInternational

December 2007
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)※2（Pooling-of-interest method）(Others)

※3

RR/DP

ED

Final

RR/DP

ED

Final

pg. 1
Copyright© ASBJ/FASF All Rights Reserved.

Inventories（LIFO）

ED

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※4

Retirement benefits

Final

Final
ED

Final

Disclosure of FV information of

Finalfinancial instruments

Investment property

ED

TC

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 instrumentsDP(※1) For "2007/ 2009" column : WG: Working Group to be establishedestablished

RR : Research Report to be issued

ED : Exposure Draft to be issued

TC : Technical Committee to be

DP : Discussion Paper to be issued

Final: Accounting Standard/Guidance, etc.

(※2)ASBJ will divide "Business combinations project" into STEP1 and STEP2.
STEP1 deal with the items related to EU equivalence assessment, and STEP2 take up others.
(※3)"Business combinations-STEP1(others)" includes issues for "Date of exchange", "Negative goodwill","Minority interests at historical cost","Step acquisitions", and “Translation of goodwill".
(※4)No schedule has been fixed at this stage, due to monitoring progress of IASB/FASB discussions.

pg. 2
Copyright© ASBJ/FASF All Rights Reserved.

25th December 2007（Inaugural Preparatory Issue）“Toward the Global Convergence”--A【Mr. Nishikawa】

First, let’s talk

Dialogue between Ikuo Nishikawa,

about the Tokyo Agreement. Now, theChairman of the ASBJ and Sir DavidJapanese media companies and the

Tweedie, Chairman of the IASB, on

press

7th November in Tokyo--

Agreement in a large manner by

have

taken

up

the

Tokyo

featuring the news on the cover page,≪Disclaimer≫ The views expressed inthis dialogue are their own, and do notnecessarily reflect the views of the
ASBJ or the IASB.

and therefore, there was very strong
reaction.
On the same day, Keidanren was
kind enough to publish a document
offering

support

to

the

Tokyo

Agreement. Then I had the opportunity
to meet with the top leaders of the four
major auditing firms and got the
impression that they all were very
positive with regards to the Tokyo
Agreement.
If I may share with you some positive
comments we obtained from the market,
first of all, the Tokyo Agreement is

1. The reactions about the Tokyo

meaningful in that it has written down

Agreement from the constituentsa specific timeline for the scheduling of
the convergence. Secondly, it once again【Mr. Nishikawa】

Welcome to Tokyo.

reaffirmed the fact that the direction ofThank you for being with us today. I’m

Japanese

accounting

standards

issorry to bother you when you are weary

looking towards the same direction as

from a long journey, but shall we have a

the global standards. Thirdly, the fact

small talk about global convergencethat Japan is expected to actively

since you came all the way?

participate in the development of the
global accounting standards.

【Sir David】

No problem. I am very

pleased to meet you again.

With this high level of expectations
amongst stakeholders in Japan, we arepg. 3
Copyright© ASBJ/FASF All Rights Reserved.

determined to make our utmost efforts

States now realizes it’s the last major

towards the achievement of the Tokyoeconomy that has its own accounting

Agreement.

standards,

or

will

have

its

own

Now, to you, David, how do you findaccounting standards, after 2011. And I

the reaction in the Europe or in the

believe the US is now getting ready to

U.S.?

set a date when it too will switch to
IFRS【 Sir David 】(International

Financial

I think the global

Reporting Standards). That has beenreaction was quite dramatic. The fact

said by the chairman of the FASB. I

that many have looked upon Japanese

think the fact that Japan did it has

accounting as being there for years andaccelerated the process in the United

years to come, and suddenly we have an

States.

agreement that Japan is going to takeI think within our organization it’spart in the development of global

had another effect in the sense that if

standards, I think that made a hugeJapan

impression. I think a lot of credit muststandards, why should Japan have a

go to the ASBJ in seizing the moment.

big say in what the eventual outcome

wasn’t

going

to

adopt

the

I think what it’s done has had anwill be? That’s all changed, too, andeffect that has been very dramatic in

Japan is entitled to have a major say in

the United States. Over the last few

what the eventual outcome of our

weeks I’ve been in the United States

standards will look like. Japan’s input

twice, appearing before the Senate

is now welcome at any stage of our

Bankingdeliberation.

Subcommittee 1

and

also

meeting with the representatives of theI think there’s one other thing thatFASB (Financial Accounting Standards

perhaps should be mentioned for the

Board)(FAF:

future. We’ve had the economies ofFinancial Accounting Foundation), andChina, Japan, India, Korea, all moving

I think the impression that the United

towards IFRS, however the IASB is

and

their

trustees

The Subcommittee on Securities,
Insurance and Investment Committee on
Banking, Housing, and Urban Affairs of
the United States Senate（on 24th Oct.
2007）.
1dominatedby

AmericansandEuropeans. That can’t last. We have aconstitutional review starting next year,
and that is something Japan reallypg. 4
Copyright© ASBJ/FASF All Rights Reserved.

25th December 2007（Inaugural Preparatory Issue）

wants to look at, to make suggestions

to be having to look towards both ways.

about what the IASB should look like in

Another point. So far, the ASBJ has
been proceeding with projects with thethe future.

IASB on the one hand, as well as
regular meetings with the FASB on theother hand for exchange of opinions.
These meetings have been hosted fromthe perspective of both organizations
proceeding towards convergence with
IFRS. So, in the future, we may be able
to study the possibility of putting
together and integrating these two
separate meetings into one.

2. U.S.’ move
【Sir David】【Mr. Nishikawa】

May I talk about aintegrateThat’s a possibility (totwomeetings

into

one).

little bit old times? Now, back when the

However, I find the bilateral meetings

financial Big Bang had taken place invery helpful, because what we’re trying

Japan in the 1990, in a way we had

to understand what people are doing (inbeen looking both ways, IFRS as well as

the bilateral meeting).

towards US GAAP (Generally Accepted

I find the more people involved in the

Accounting Principls). And considering

meeting, the less you can go into depth.

that United States is the advanced

Bilateralnation when it comes to financial

ascertain precisely the views of thetransactions, we may have been slightly

other party.

more tilted towards the US GAAP backpresent it is not quite so easy.

meetings

enableus

toWhen several parties arethen. So, the Japanese standards are,in a way, a mixture of US GAAP and【Mr. Nishikawa】

By the way, you

IFRS, I think. But I believe that now

mentioned you’re testifying at thewith the matters of the MOU between

Senate subcommittee. And in that

the IASB and the FASB and so forth, it

context, Chairman Herz of the FASB

would no longer be necessary for Japan

has made quite a dramatic comment.

pg. 5
Copyright© ASBJ/FASF All Rights Reserved.

I imagine the background of Bob

continue to watch closely whether the

Herz’s testimony. Like Japan, or morecomment made by Bob Herz will lead tothan Japan, in the case of the Unitedconsensus-building in the United States.

States, because of the large size of the

We are of the same intention in that wemarket and because their own GAAP is

do not wish to cause any turbulence inwell rooted, they face a situation where

the country.

it would not be possible for them to【Sir David】

convert fully to IFRS at a stretch.

Basically, I also think

I think Bob Herz had intended tothere has been a sea change in thedeliver two points: first of all he shows

views in the United States. I think thatthe goal that the United States will

the Concept Release2 that was issued

migrate to the improved version of IFRS,

by the SEC (The Securities Exchange

and

such

Commission) came as a bit of a surprisemigration takes place, the environment

to many Americans, the fact thatwill be developed within the United

Americans would be allowed the choice

States to enable that. Then his intentionof views in either US GAAP or IFRS.

was not to give a choice to the US

The view of the FASB is, having acompanies to use US GAAP or IFRS, but

choice is all right for the short term, but

to switch all to IFRS at once.

it should only be allowed if there was an

in

the

meantime,

until

It is not easy to make a decision toultimate end that the US switches overswitch all at a stretch when we accept

to a single set of standards: IFRS. I

IFRS. Japan comes to the same things

would not have said that this was theas the United State to take steps toview a year ago, but there has been areach that point. But in the case of themajorsituation in Japan, to a certain extent,

moved in line with, or moved ahead of

we have tolerated the use of US GAAPthe general view. But we know there

already;

therefore,

are a lot of American companies thatexperienceinhavingalready
two

have
sets

of

standards in parallel. The Japanese
preparers may be more familiar withhaving two sets as a choice than theAmericans. In this context, we willchange.

Bob’sthinkinghas

have subsidiaries throughout the world,
SEC Concept Release On Allowing U.S.
Issuers To Prepare Financial Statements
In Accordance With International
Financial Reporting Standards（Issued on
7th Aug. 2007）.

2

pg. 6
Copyright© ASBJ/FASF All Rights Reserved.

25th December 2007（Inaugural Preparatory Issue）

as you have Japanese multinationals

similarity in practice is also of greattoo, and hundreds of them using IFRS.

importance. Although principle-based

So converting them all back to US

approach has its own merits, it also

GAAP

embeds the risk of the possibility of

is

very

expensive

andiscompletely different practices coming

becoming increasingly unpopular.
And one more point. Like Japan, the
IASB believes that you have to use

out of the same principle, so that is one
concern we have.

judgments in accounting and should not
answer every question. So we should【 Sir David 】

The principle-basedinstandards are going to be quite hard toprinciple-based. The Americans are also

write. The way both Japan and theprinciple-based, but with an awful lot of

United Kingdom have been used to

guidance. Now it’s got so heavy that

dealing with standards is the fact thatcompanies

judgment is required on the basis of the

try

and

make

are

the

standards

struggling

even

to

interpret what’s there. This is anotherprinciples.

But

reason for starting again.

principles,

Japan’s decision has come when thecomparability.

if

we

have

loose

we

will

not

have

If

we

can

get

the

US was considering all of these matters.

principles to be set out tightly, then that

Thereforehowalmost in itself is an anti-abuse device.

much your decision has affected the

For example, if Ikuo’s answer was 94

don’t

underestimate

and mine was 91, that’s acceptable. If

United State.

one of us got 61, then clearly the

3. The balance between practice andstandard is totally defective. And wetheory in the development of

have to accept there will be a small

accounting standards

envelope of acceptability. Everyone will
not get precisely the same answer, but【Mr. Nishikawa】

Now that you haveyou don’t anyway in accounting. And

touched upon the principle-based policy,

what we don’t want to do is get into the

I would like to mention the following.

situation which they have in the United

On one hand, it is important that weStates.

come up with a united set of standards,
but

at

the

same

time,

ensuring

I watched a litigation lawyer in
New York hold up in one hand a copy of

pg. 7
Copyright© ASBJ/FASF All Rights Reserved.

the American Constitution, which was aThat would mean that they would bevery thin document; you could hold it

listening to the evaluation in the

between a finger and a thumb, and on

market. So I think that’s very positive.

the other hand he had the American
Standards on Financial Instruments,
which he had difficulty holding in one
hand. Then he said, “Now, which ofthese would you think I’d like todefend? It’s very easy to defend a
principle in court; it is not very easy to
defend the fact that somebody has
forgotten a rule on page 743.”
I think that’s the difference - wehave to operate with good auditing
systems,withsystems

and

good
with

enforcement
integrity.

The

4. How the inputs from the IFRS
adopted countries have been usedin the development of standards

standard-setter’s job is to set the scene
for that. The job of industry and the【Mr. Nishikawa】

Well, it is very

auditor is to make sure that a fair

important for the global economy thatreflection is given within the principles.

comes up with high-quality standards
through convergence. I think there has【Mr. Nishikawa】

In that sense, I

to be a process where the major

think that the practice and enforcement

countries involved in convergence input

are of great importance, so in thatdiversified information based upon thecontext I generally agree to what you

expertise that each of these countries

have mentioned.

had accumulated so far in order to

And I recently heard that IASCF

stimulate a wide range of discussions.

(International Accounting Standards

Currently, how are the inputs from theCommittee

becountries such as Australia or Canada

conducting oversight on the suitability

that have already adopted IFRS used inor the actual status quo of application of

the development of standards? Now, on

standards that had been decided once.

the basis of the Tokyo Agreement, weFoundation)

will

pg. 8
Copyright© ASBJ/FASF All Rights Reserved.

25th December 2007（Inaugural Preparatory Issue）

are going to accelerate our inputs to you.

delighted to see the ASBJ do something

So I am interested in.

similar. If there are particular issues at
the ASBJ, the ASBJ has now time to【Sir David】

It’s different from thethink about this way.

way in which we’re working with the
ASBJ. We have ten major projects, and5. Formulation of the structure to

more if the ASBJ wishes to get involved,

achieve the Tokyo Agreementin which you can give constant input.
We get occasional input from Canada【 Mr. Nishikawa 】

We have toand Australia, if there is something inestablish a mechanism or structure

particular that they’re concerned about.

that would enable inputs from Japan to

And they often help us with a project

the IASB on routine basis. In that sense,

that’s not on our agenda, because wewe need to establish such a mechanism

have no time or room for it, but wethat will get off on the right foot. But at

know we’ll have to go on our agenda one

theday. For example, Australia has been

constraints resource-wise, so we would

looking at intangible assets and also at

like to clarify which of the staff would

extractive industries, oil, gas mining.

be responsible for which area. And

The board has been working with some

hopefully, when Mr. Wayne Upton 3

other

But

visits Japan on January, we would be(Australia is) doing the research andable to consult with him on suchcoming forward the result such as

matters as well so that we could have

“Here are the accounting problems.

such mechanism in place as early as

Here are possible solutions. On balance

possible.

standard-setterstoo.

we think this will be the answer.” In
that

event

we

will

publish

same

time,

we

are

under

Well, David, how about the IASB

their

side?

research as a discussion paper. That
will save us two years when we actually【Sir David】

start the project.

I think a big change will

come. The way that the ASBJ and theThis project is something that wehave to deal within the accounting
standards in years to come and we’d be

IASB worked before was that we were
Mr. Wayne Upton, Director of Researchof the IASB.

3

pg. 9
Copyright© ASBJ/FASF All Rights Reserved.

looking at the existing IASB standards.

on quite a different, almost a real-time

From now on, we would like to see what

basis as opposed to every six months

principle we should adopt into new

the boards get together. I think that isstandards on the basis of arguments

the fundamental change that we areforwarded by the ASBJ. This we feelmaking.

will be very important while we aredeveloping the new standards.

【Sir David】

I realize we’re coming toIt’s probably far better for us if

the end of our time together but I would

Japan becomes actively involved injust like to mention that when I was

shaping the future as opposed tolast here, we met somebody whotinkering with the old standards. The

mentioned the fact that the IASB was

big change that Ikuo and the ASBJ has

like the Black Ship arriving off Japan. I

brought in is the focus on the future.

don’t think the Tokyo Agreement was

All of these projects that we’rethe Black Ship. I think Ikuo is likeworking on now are at a very early

Admiral Togo there. (laughter) Japan

stage. I often say that the IASB has

did this because Japan wanted to do

only been standard-setting for about athis, and we’re delighted to join in, andyear now. We’ve been trying to fix

it’s a real asset to us to have Japan sothings that we inherited in the past in

actively involved in the future.

the last five years, but now we’removing forward. And I think that’s the【Mr. Nishikawa】

Thank you verymuch. We look forward to working

big difference for us.
About the structure, there would be

together as we work towards thetwo major changes. One would be thecommongoal

fact that the staffs, as Ikuo mentioned,

convergence.

would know who their opposite numberin the other board and be able to justpick up the telephone or e-mail and getin touch directly. The second thing, we
feel that the directors have to have far
more contact than they’ve had in thepast. And the flow of information will be

pg. 10
Copyright© ASBJ/FASF All Rights Reserved.

ofhigh-quality

25th December 2007（Inaugural Preparatory Issue）

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“ASBJ Newsletter”(Inaugural Preparatory Issue)
25th December, 2007

Editor：Akiyoshi Maruyama
The

views

expressed

in

ASBJ

Newsletter are not necessarily those of
the ASBJ or the FASF. The Authors andPublishers accept no responsibility for
any loss or damage resulting fromreliance on the views expressed herein.

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