As the US reveals an IFRS road
map, firms in the world’s second-largest economy are also preparing
to converge with global standards.

Further growth in the Japanese accounting market is expected
from additional work that convergence with IFRS will create.
Previously, financial statements prepared to local accounting
standards by overseas affiliates of Japanese companies, such as
standards in China, Singapore and the US, were accepted in Japan.
But new regulation now requires statements to be prepared in
accordance with J-GAAP, US GAAP or IFRS.

“IFRS is still a big topic,” Ernst & Young ShinNihon
(E&Y) global desk partner Mitsumasa Ueno said. “We have J-GAAP
but must convert to IFRS. Some items are not converting. For
example, IFRS accepts the purchase method of accounting only for
mergers but J-GAAP admits both the purchase method and pooling
method; but pooling will be dropped by 2010 to help with

Big Four firms and some of the mid-tier are already providing
IFRS support to clients though the amount of support required is
predicted to grow enormously as the convergence project gathers

E&Y set up an IFRS desk three years ago and plans to
increase the number of Japanese and foreign IFRS experts in the
future. The team currently numbers eight people – three partners
and five managers. Within three years, the IFRS team will increase
to 25 members, including foreign partners.

“We have established a core IFRS team and E&Y will train our
audit specialists,” Ueno explained. “We have the possibility to
change J-GAAP to IFRS, then it will be possible to offer IFRS
training to clients on a consulting or training basis.”

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KPMG AZSA & Co partner Tatsuhiko Yano said the firm is now
placing an emphasis on account advisory services, including
convergence work for IFRS and US GAAP, especially IFRS financial

He added: “This is a busy year because of the internal control
audit introduction but next year will be less busy, so every firm
is thinking of what comes next.

“Possibly internal audit is one of the areas – but IFRS advisory
and internal control audit are the major areas we will focus on
from now on – especially next year.”

The unification of accounting standards in Japan is being driven
by the Japanese Institute of Certified Public Accountants.

David Hayes