11
Developments of Accounting Standards and XBRL
Ikuo NishikawaIkuo NishikawaVice ChairmanVice Chairman
Accounting Standards Board of JapanAccounting Standards Board of JapanNovember 7, 2005November 7, 2005
22
1 . Introduction
1. Our organization
2. Recent developments of Accounting Standards in Japan
3. Joint project for convergence between ASBJ and IASB
4. Expectation for XBRL
33
1 - 1 . Our organization - ASBJ and FASF
* For each agenda project, a Technical Committee will be formed .
Secretariat<2>
Board ofDirectors
<14 >
*Technical Committee
<13 board members, including 2 full-time members> 8 advisors, 26 research staffs
Accounting Standards Board of Japan
<11>
(Administration, Accounting, Disclosure, Public Relations)
Trustees<16>
Auditors
Theme Advisory Council<15>
《 FASF》
44
1 - 2 . ASBJ
BAC and Accounting Big Bang
Philosophy as a private sector
13 board members, including 2 full-time members
26 technical staff (second largest)
FASF’s activity
55
1 - 3 . Process of discussions
Meetings are open to public.
Approval by FSA
Due process - exposure draft and discussion paper
Approved for issuance on the Board when 60% or more favor
Standards and other final documents : 25 Outstanding ED and Discussion paper : 19
66
Business combinations and Business DivestitureBusiness combinations and Business Divestiture
Share-based PaymentShare-based Payment
Presentation of Net Assets on the Balance SheetPresentation of Net Assets on the Balance Sheet
Statement of Changes in EquityStatement of Changes in Equity
Quarterly Financial ReportingQuarterly Financial Reporting
※※ except themes on joint project between the ASBJ and the except themes on joint project between the ASBJ and the
IASBIASB
2 - 1 . Recent Developments of Accounting Standards
77
Summary of Accounting Treatment under the Purchase Summary of Accounting Treatment under the Purchase MethodMethod
(2) Allocation of acquisition cost Scope : Identifiable assets and liabilities Amount : Fair value as of acquisition date ① Market price ② Amount reasonably calculated
Differences( Goodwill ( or Negative goodwill ))
To be amortized over the period expected utility to the acquirer
but less than 20 years
(1) Measurement of acquisition cost
Acquisition costs※
+ Direct expenses incurred for acquisition
※ Public entity : Fair value of shares issued upon acquisition
2‐2 . Business combination (1/2)
88
Distinction between acquisition and combining of interestsDistinction between acquisition and combining of interests
Consideration criterion( voting common stock )
Voting rights ratio criterion( within a range from 55 %~ 45 %)
Criteria other than voting rights ratio( 4 criteria including occupying majority of board members )
Combining of interests( Applying the pooling of interests method )
Combining of interests( Applying the pooling of interests method )
Applying th
e purchase m
ethod
Applying th
e purchase m
ethod
Yes
Yes
Yes
No
No
No
Acquirer is identified
simultaneously
2‐2 . Business combination (2/2)
99
Accounting for owners
(whether transfer gains or losses are recognized or not)Accounting for owners
(whether transfer gains or losses are recognized or not)
Owners of combining entityOwners of entity combined
consideration
Entity accepting business(combining entity)
Company B
Transferred business
Business a
Entity divesting business(entity combined)
Company A
Accounting for business divestitureContinuity or liquidation of investment
Whether transfer gains or losses are recognized or not
Accounting for business divestitureContinuity or liquidation of investment
Whether transfer gains or losses are recognized or not
Accounting for business combinationAcquisition or combining of interestsWhether goodwill is recognized or not
Accounting for business combinationAcquisition or combining of interestsWhether goodwill is recognized or not
Relationship between accounting for business combination and accounting for business divestiture
Business
Transferred business
Business a
2‐3 . Business Divestiture
1010
2‐4 . Share-based Payment (1/2)
ScopeScope
1.1. Share-based compensation arrangements with Share-based compensation arrangements with employees or directorsemployees or directors
2.2. Share-based payment transactions with those Share-based payment transactions with those other than employees or directors when goods or other than employees or directors when goods or services are receivedservices are received
3.3. Arrangements in which a company’s own equity Arrangements in which a company’s own equity instruments are used as considerationinstruments are used as consideration
1111
Recognition and MeasurementRecognition and MeasurementRecognitionRecognition - Compensation cost should be recognized over the - Compensation cost should be recognized over the
period for services renderedperiod for services rendered - Credit entries are recorded in “net assets”- Credit entries are recorded in “net assets” - When exercised : reclassified into owner’s equity- When exercised : reclassified into owner’s equityMeasurementMeasurement - Fair value at the time of grant- Fair value at the time of grant - Not reviewed afterwards- Not reviewed afterwards
2‐4 . Share-based Payment (2/2)
1212
2‐5 . Presentation of Net Assets on the Balance Sheet
BackgroundBackgroundTrigger : Controversy over the credit entry of Stock optionTrigger : Controversy over the credit entry of Stock option
Harmonization with international accounting standardsHarmonization with international accounting standards
OverviewOverviewNet Assets consists of Net Assets consists of Owners’ equityOwners’ equity : : attributable to attributable to shareholders of the shareholders of the
parent companyparent companyOther components:OCI, Warrants issued, Minority Other components:OCI, Warrants issued, Minority
interestinterest
1313
2‐6 . Presentation of Net Assets on the Balance Sheet
Net assetsNet assetsⅠ Ⅰ Owners’ equityOwners’ equity 1 Common stock1 Common stock ×××××× 2 Capital surplus2 Capital surplus ×××××× 3 Retained earnings3 Retained earnings ×××××× 4 Treasury stock △ 4 Treasury stock △
×××××× Total owners’ equityTotal owners’ equity ××××××Ⅱ Ⅱ Accumulated other comprehensive incomeAccumulated other comprehensive income 1 Net unrealized gains or losses on available-for-sale securities 1 Net unrealized gains or losses on available-for-sale securities ×××××× 2 Deferred gains or losses on hedging instruments 2 Deferred gains or losses on hedging instruments ×××××× 3 Foreign currency translation adjustments 3 Foreign currency translation adjustments ×××××× Total accumulated other comprehensive income Total accumulated other comprehensive income ××××××Ⅲ Ⅲ Warrants issuedWarrants issued ××× ××× Ⅳ Ⅳ Minority interestMinority interest ××× ××× Total net assets Total net assets ××××××
1414
2‐7 . Statement of Changes in Equity
BackgroundBackground
Newly required by the New Company ActNewly required by the New Company Act
Convergence with international accounting Convergence with international accounting standardsstandards
1515
BackgroundBackground
The quarterly financial reporting system will be The quarterly financial reporting system will be introduced to Japanese listed companies by introduced to Japanese listed companies by Securities and Exchange LawSecurities and Exchange Law
2‐8 . Quarterly Financial Reporting
1616
3 - 1 . Basic position of ASBJ on international convergence
The ASBJ agrees with the objective of international convergence to high-quality accounting standards, since it is beneficial to respective capital markets around the world.
In order to promote international convergence to high-quality accounting standards, the ASBJ will establish closer relationships with other accounting standard setters around the world.
The ASBJ believes that the international convergence to high-quality accounting standards should be attained through the process of assessment and selection by market participants..
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3 - 2 . Launch of the project
(1)(1) Sir David Tweedie, chairman of the IASB, proposed the Sir David Tweedie, chairman of the IASB, proposed the joint project for convergence. (July 2004)joint project for convergence. (July 2004)
(2)(2) The ASBJ replied that it agreed with the proposal to The ASBJ replied that it agreed with the proposal to launch the joint project. (September 2004)launch the joint project. (September 2004)
(3)(3) Sir David Tweedie visited Japan. The ASBJ and the IASB Sir David Tweedie visited Japan. The ASBJ and the IASB started talks about the joint project. (October 2004)started talks about the joint project. (October 2004)
(4)(4) The ASBJThe ASBJ and the IASB agreed to the key elements on and the IASB agreed to the key elements on proceeding the joint project. (January 2005)proceeding the joint project. (January 2005)
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3 - 3 . Key elements for joint project
(1/2)
- - Key elements agreedKey elements agreed
Utilize their respective conceptual frameworks or basic philosopUtilize their respective conceptual frameworks or basic philosophies to choose the better accounting standards.hies to choose the better accounting standards.Address the differences in their respective conceptual frameworAddress the differences in their respective conceptual frameworks later in the project as a separate subproject, at a time agreed bks later in the project as a separate subproject, at a time agreed by the boards.y the boards.Consider their respective due process requirements in arriving at Consider their respective due process requirements in arriving at agreement.agreement.The ASBJ will undertake a study to get an overall picture of majThe ASBJ will undertake a study to get an overall picture of major differences between the respective standards and will identify or differences between the respective standards and will identify topics to be discussed.topics to be discussed.Adopt a phased approach to the comparative reviews of differenAdopt a phased approach to the comparative reviews of differences in individual standards.ces in individual standards.
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- - Key elements agreed (continued)Key elements agreed (continued)
The scope of the first phase is the standards in place as of 31 The scope of the first phase is the standards in place as of 31 March 2004, with the following exceptions;March 2004, with the following exceptions;
①① Standards under review or intended to be reviewed in the joiStandards under review or intended to be reviewed in the joint projects between the IASB and the FASB.nt projects between the IASB and the FASB.
②② Standards that are divergent owing to differences in the respStandards that are divergent owing to differences in the respective conceptual frameworks or basic philosophies.ective conceptual frameworks or basic philosophies.
③③ Standards recently developed.Standards recently developed.④④ Standards whose requirements are subject to legal restrictionStandards whose requirements are subject to legal restriction
s or those currently considered inapplicable in Japan.s or those currently considered inapplicable in Japan.
3 - 3 . Key elements for joint project(2/2)
2020
The ASBJ and the IASB held initial meeting on The ASBJ and the IASB held initial meeting on March 9 and 10, 2005 in Tokyo.March 9 and 10, 2005 in Tokyo.
( ( ContentsContents ))Basic philosophies underlying Japanese accounting Basic philosophies underlying Japanese accounting standards (based on our discussion paper standards (based on our discussion paper “Conceptual Framework of Financial Accounting”)“Conceptual Framework of Financial Accounting”)Comparison between Japanese accounting Comparison between Japanese accounting standards and IFRSsstandards and IFRSsTopics to be addressed in the first phase of the Topics to be addressed in the first phase of the projectproject
3 - 4 . Initial meeting
2121
Topics addressed in the first phase of the projectTopics addressed in the first phase of the project
(( 11 ) ) Measurement of inventoriesMeasurement of inventories (( IAS2IAS2 ))(( 22 ) ) Segment reportingSegment reporting (( IAS14IAS14 ))(( 33 ) ) Related party disclosures Related party disclosures (( IAS24IAS24 ))(( 44 ) ) Unification of accounting policies applied to Unification of accounting policies applied to
foreign subsidiariesforeign subsidiaries (( IAS27IAS27 ))(( 55 ) ) Investment propertyInvestment property (( IAS40IAS40 ))
* * Each topic will be deliberated within a year or two.Each topic will be deliberated within a year or two.
* * There may be additional topics in the first phase.There may be additional topics in the first phase.
3 - 5 . First phase agenda
2222
Second meeting was held in London on September 23.Second meeting was held in London on September 23.
AgendaAgendaDetails of progress concerning the five topics in the Details of progress concerning the five topics in the first phasefirst phaseAdditional topics in the first phase and otherAdditional topics in the first phase and otherConceptual frameworks (Recognition and Conceptual frameworks (Recognition and measurement)measurement)Hedge accounting, Asset removal obligationHedge accounting, Asset removal obligation
3 - 6 . Second meeting
2323
Our ultimate goal is international convergence to a Our ultimate goal is international convergence to a
set of high-quality accounting standards.set of high-quality accounting standards.
Attention should be paid to the Attention should be paid to the de factode facto rules rules
prevailing in capital markets. prevailing in capital markets.
Accord with the constituents of global markets Accord with the constituents of global markets
should be more strengthened.should be more strengthened.
3 - 7 . Our thought
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Accounting StandardsAccounting Standards ⇒ ⇒Decision-making usefulness of financial reporting Decision-making usefulness of financial reporting
(overall)(overall)
XBRLXBRL ⇒ ⇒ Enhancing the usefulness of financial reportingEnhancing the usefulness of financial reporting (user of XBRL)(user of XBRL)
4 - 1 . Objectives of Accounting Standards and XBRL
2525
Easy retrieval of necessary information Easy retrieval of necessary information
Enhanced comparability of financial analysis Enhanced comparability of financial analysis
Enhanced affirmation of consistency among data Enhanced affirmation of consistency among data
Availability of comparative reportsAvailability of comparative reports
4 - 2 . Contribution of XBRL
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Accounting StandardsAccounting Standards ⇒ ⇒ Conceptual and theoretical approachConceptual and theoretical approach
XBRLXBRL ⇒ ⇒ Series of interpretationSeries of interpretation
4 - 3 . Different Approach
2727
No change for the approach of developing Accounting StandardsNo change for the approach of developing Accounting Standards
Accounting Standards Setters do not interfere with Accounting Standards Setters do not interfere with
developments of taxonomy of XBRLdevelopments of taxonomy of XBRL
Wait for developments of taxonomy to reach the comfortable Wait for developments of taxonomy to reach the comfortable
levellevel
4 - 4 . Developments of XBRL Taxonomy
2828
Single Standards in the world is the ultimate Single Standards in the world is the ultimate goalgoal
XBRL may function as a bridgeXBRL may function as a bridge
Future role of FASF?Future role of FASF?
4 - 5 . Expectation
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