Japanese FSA Will Allow Voluntary Use of IFRS for International Companies

The Financial Services Agency will permit the voluntary use of IFRS by certain Japanese listed companies starting from the consolidated fiscal years ending on or after March 31, 2010. During the public consultation period, the FSA received six sets of comments, which did not oppose the proposed list of designated IFRSs. Taking account of these comments, the FSA has designated all IFRSs and IFRIC interpretations approved and issued by the IASB at the end of 2009 for the purpose of voluntary application of IFRSs for the specified companies.

The specified companies that can voluntarily implement IFRS are Japanese companies whose financial or operational activities are conducted internationally and whose shares are listed on a Japanese securities exchange. The companies must also allocate employees with ample knowledge of IFRSs and establish a structure enabling them to properly prepare consolidated financial statements in accordance with IFRSs. Companies choosing to employ IRS will be required to disclose such.

Earlier the FSA said that a decision regarding the mandatory use of IFRSs will be made around 2012, with due consideration to various factors, including whether: 1) financial statements preparers, auditors, investors and other stakeholders are well prepared for the practical application of IFRSs through sufficient training and education on IFRSs; 2) due process for the setting of IFRSs is ensured and governance of the IASB oversight body sufficiently strengthened; and 3) the process of setting IFRSs gives proper consideration to the economic reality of business and trade practices in various countries.

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