Japan in support of ‘fair value’ accounting
8 Mar 10
Japan will adopt the controversial IFRS 9 “fair value” international accounting standard for some of its companies, in a move which boosts the International Accounting Standards Board’s push for convergence to a single, global accounting system by the middle of next year
The US and Europe have failed to agree on the degree to which fair value, or “mark-to-market”, accounting should be used in the valuation of financial assets.
The Japanese Financial Services Agency is to include the controversial rule, the first part of IFRS 9, in a package to be made available for use by some Japanese companies on a voluntary basis from March 10.
The rule values loans and loan-like instruments at cost, and everything else, including complex instruments such as derivatives, at fair value. Accountants consider it a good compromise position in the fair value debate.
The decision by Japan, the world’s second-largest capital market after the US, to show support for IFRS, or International Financial Reporting Standards, will go some way to bolster the position of the International Accounting Standards Board and its chairman, Sir David Tweedie, at a difficult time.
European politicians sent shockwaves through the accounting world last year by refusing to sanction an early introduction of IFRS 9 on fair value. Those opposed said that the rule did not go far enough to limit the use of fair value accounting.