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

Related reading

Fiona Westwood of Smith and Williamson.