Japan’s Financial Services Agency has decided to let domestic companies use International Financial Reporting Standards beginning in March of next year, leaving the U.S. as the only major economy not using the global reporting rules in some form.
The FSA’s decision to allow voluntary use of IFRS is a timely boost to the global standards project, which was rocked last month when the European Union decided not to adopt a revised version of IFRS 9, a standard on financial instruments.
International Accounting Standards Board Chairman Sir David Tweedie said Japan’s decision was “an important milestone on the path toward global standards.” He added: “This decision should provide encouragement to other countries on the path to embracing global standards.”
The U.S. Securities and Exchange Commission is likely to make a move on the adoption of IFRS in early 2010, one of its Commissioners, Elisse Walter, said in a recent speech. But she noted there were, “critical issues that still need to be addressed before the Commission can move forward.”
The Japanese FSA said that domestic listed companies that meet certain requirements will be given the option to prepare their consolidated financial statements under IFRS starting from financial years ending on or after March 31, 2010. The FSA said it would decide whether to make IFRS mandatory for all companies “around 2012.”
As part of the voluntary IFRS move, the FSA said it would scrap existing rules that allow some Japanese companies to submit their consolidated financial statements prepared under U.S. Generally Accepted Accounting Principles. But that will not end until financial years ending after March 31, 2006.
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