Financial statements are prepared, in principle, in accordance with accounting principles generally accepted in Japan (J GAAP) as issued by the ASBJ. For consolidated financial statements of listed companies, use of IFRS Standards ('Designated IFRS'), Japan's Modified International Standards (JMIS) and US GAAP is also permitted. JMIS are the new set of accounting standards inaugurated by ASBJ in 2015 and developed based on the endorsement process of accounting standards and interpretations issued by the International Accounting Standards Board (IASB). With the introduction of JMIS, there are four accounting frameworks that the listed companies in Japan may use, but the voluntary application of IFRS Standards is continuously expanding.
The Accounting Standards Board of Japan (ASBJ), under the auspices of the Financial Accounting Standards Foundation (FASF), is responsible for the development and deliberation of accounting standards in Japan. The ASBJ is a private sector independent accounting standard-setting board which also contributes to the development and improvement of international accounting standards. All accounting standards set by the ASBJ are subject to endorsement by the Financial Services Agency (FSA), a Japanese government agency.
For more information about the accounting standards in Japan, please visit ASBJ website,
IFRS adoption in Japan
Since 2010, companies that meet certain criteria have been permitted to voluntarily apply IFRS Standards for consolidated financial statements in Japan. In 2013, the FSA revised its Cabinet Office Ordinances and eliminated certain requirements in order to enhance further application of IFRS Standards in Japan. As a result, the number of companies eligible to apply IFRS Standards was increased, and virtually all listed companies and unlisted companies are allowed to use IFRS Standards for consolidated financial statements.
Under the current regulation, a company may voluntarily use IFRS Standards if it meets the following criteria:
- The company discloses, in its Annual Securities Report, information regarding specific efforts to ensure that the consolidated financial statements will be prepared in accordance with 'Designated IFRS'; and
- The company allocates executives or employees with ample knowledge about 'Designated IFRS', and puts in place a structure to ensure that the consolidated financial statements will be prepared properly in accordance with Designated IFRS.
'Designated IFRS' is a set of IFRS Standards that have been designated by the Commissioner of the FSA. Each IFRS standard is made effective through the formal process of endorsement.
The number of listed companies voluntarily adopting IFRS
According to the Tokyo Stock Exchange, as of June 30, 2016, the number of listed companies voluntarily adopting IFRS Standards (including those that officially announced their intention to adopt) is 115, and an additional 22 companies have disclosed that they are planning to adopt IFRS Standards in their earnings reports. The number of voluntarily adoption IFRS is consistently increasing in Japan.
The JICPA has supported a single set of high-quality accounting standards and has implemented various measures to contribute to the promotion of the adoption of IFRS in Japan, in cooperation with other stakeholders, such as FSA, ASBJ, IASB and IFRS Foundation. The JICPA provides various opportunities for members to enhance their understanding of IFRS, such as seminars, workshops, study sessions and knowledge sharing. The JICPA discusses IFRS-related issues in its committees and provides comments and inputs to the ASBJ and the IASB.