Japan embraces new fair value rule

Listed Japanese companies will begin using the new international fair-value accounting rule this week.

Come Wednesday, Japan will allow use of IFRS 9, the international fair value rule reworked in haste following the global financial crisis, the Financial Times reports.

The fair value principle forced companies to value assets at their market price and was blamed for amplifying the crisis as the value of financial instruments fell in illiquid markets, following the crisis.

The new standard works on a mixed measurement model which will allow controversial loan books to be valued at amortized cost, removing a key element of volatility.

Japan joins Australia and New Zealand, which have also absorbed the new rule into their accounting code.

Japanese adoption will place further pressure on Europe, which has so far failed to indicate whether it will absorb the standard.

Further reading: Japan in support of ‘fair value’ accounting