Japan Agrees to IFRS Convergence by 2011

Ikuo Nishikawa, Chairman of the Accounting Standards Board of Japan (ASBJ), and Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB), jointly announced today an agreement (known as the Tokyo Agreement) to accelerate convergence between Japanese GAAP and International Financial Reporting Standards (IFRSs), a process that was started in March 2005.

As part of the agreement the two boards will seek to eliminate by 2008 major differences between Japanese GAAP and IFRSs (as defined by the July 2005 CESR assessment of equivalence), with the remaining differences being removed on or before 30 June 2011. Whilst the target date of 2011 does not apply to any major new IFRSs now being developed that will become effective after 2011, both boards will work closely to ensure the acceptance of the international approach in Japan when new standards become effective (see the attached copy of the agreement).

Commenting on the agreement, Mr Ikuo Nishikawa said:

“We have reaffirmed our commitment to convergence and are pleased to have an opportunity to increase the significant involvement of the ASBJ and Japan more generally in the international standard-setting process. It is expected that this agreement will enable Japanese companies to publish financial statements prepared under Japanese accounting standards without any remedies continuously in the EU and other capital markets using IFRSs.”

Sir David Tweedie said:

“We are delighted that the ASBJ, representing the interests of the second largest economy in the world, has agreed to accelerate convergence between Japanese GAAP and IFRSs and look forward to its active participation in shaping the future direction of international financial reporting standards.”

About the ASBJ

The Accounting Standards Board of Japan (ASBJ) was established in July 2001 as a private sector organisation. Accounting standards developed by the ASBJ are to be authorised by the Financial Services Agency as part of generally accepted accounting principles (GAAP). The ASBJ develops accounting standards and implementation guidance that appropriately reflect the environment in which business enterprises operate. The ASBJ also communicates with corresponding organisations abroad and contributes to the development of global accounting standards.

About the IASB

The International Accounting Standards Board (IASB) began operations in 2001. To fund the operations of the IASB contributions are collected by its Trustees, the IASC Foundation, from the major accounting firms, private financial institutions and industrial companies throughout the world, central and development banks, and other international and professional organisations.

The 14 Board members (12 of whom are full-time) are drawn from nine countries and have wide international experience and a variety of functional backgrounds. The IASB is committed to developing, in the public interest, a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements. In pursuit of this objective, the IASB co-operates with national accounting standard-setters to achieve convergence in accounting standards around the world.

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