Japan steals march on fair value rules

While Europe stalls, Japan has raced ahead to become the largest economy so far to take advantage of new accounting rules reformed in the wake of the banking crisis.

Japanese companies began using the International Acc­ount­ing Standards Board’s (IASB) new fair value rules yesterday, increasing pressure on other developed nations to adopt as well. It is the first stage of a three-part revision of the fair value standard. The rules, redesigned with banks in mind, use a mixed-measurement model to value assets at either their market price or amortised cost.

Japan now joins Australia and New Zealand in adopting IFRS 9, leaving Europe trailing while it debates whether to accept the new rule.

The move points to Japan’s growing influence on international standard setting, and the creeping displacement of the traditional centre of influence in Europe, which has shown no clear signs of endorsing the rule since it was released in November. Meanwhile, frustration grows within some banks as they wait to see if the EU will endorse the rule.

In November 2009, Douglas Flint, chief financial officer at HSBC, said the IASB was being backed into a corner over its revision of fair value by
those playing politics with accounting. “Many of the objectors to IFRS 9 sought to take the IASB to a position they knew it could never support, because their agenda was to create conflict with the IASB as part of a larger political agenda,” he said at the time.

Meanwhile, the IASB has made no secret of its desire to see Japan play a greater role in standard setting. In April, IASB chairman Sir David Tweedie is set to speak to the Japan Society in New York on “his desire to see Japan play a leading role in shaping the future direction of global financial reporting”.

Further reading:

Japan Society Accounting for Financial Reform