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 convergence.”
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 pace.
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.”
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 statements.
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.