Discussion Papers “Conceptual Framework of Financial ... - XBRL

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Dec 13, 2013 (3 years and 11 months ago)

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1


Developments of Accounting Standards


and XBRL



Ikuo Nishikawa

Vice Chairman

Accounting Standards Board of Japan

November 7, 2005

2


. Introduction

1.
Our organization

2.
Recent developments of Accounting Standards in
Japan

3.
Joint project for convergence between ASBJ and
IASB

4.
Expectation for XBRL

3


-

.
Our organization

-


ASBJ and FASF

* 
For each agenda project, a Technical Committee will be formed .
Secretariat
<2>
Board of
Directors
<14 >
                 *
Technical Committee
<13 board members, including 2 full-time members>
8 advisors, 26 research staffs
Accounting Standards Board of Japan
<11>
(Administration, Accounting,
Disclosure, Public Relations)
Trustees
<16>
Auditors
Theme Advisory Council
<15>

FASF


4


-

. ASBJ

BAC and Accounting Big Bang

Philosophy as a private sector

13 board members, including 2 full
-
time
members

26 technical staff (second largest)

FASF’s activity


5


-

. Process of discussions



Meetings are open to public.

Approval by FSA

Due process
-

exposure draft and discussion paper

Approved for issuance on the Board when 60% or
more favor

Standards and other final documents

25


Outstanding ED and Discussion paper : 19


6

Business combinations and Business Divestiture

Share
-
based Payment

Presentation of Net Assets on the Balance Sheet

Statement of Changes in Equity

Quarterly Financial Reporting



except themes on joint project between the ASBJ and the IASB


-

. Recent Developments of
Accounting Standards

7


Summary of Accounting Treatment under the Purchase Method


(2) Allocation of


acquisition cost


Scope

Identifiable assets and liabilities


Amount

Fair value as of acquisition date





Market price




Amount reasonably calculated

Differences


Goodwill

or Negative goodwill
))

To be amortized over the period

expected utility to the acquirer

but less than 20 years



(1) Measurement of


acquisition cost



Acquisition costs




Direct expenses incurred


for acquisition




Public entity

Fair value of shares


issued upon acquisition





. Business combination (1/2)

8

Distinction between acquisition and combining of interests






Consideration criterion


voting common stock


Voting rights ratio criterion


within a range from 55
%~
45
%)

Criteria other than voting rights ratio


4 criteria including
occupying majority of board members


Combining of interests


Applying the pooling of interests method



Applying the purchase method

Yes

Yes

Yes

No

No

No

Acquirer is
identified
simultaneously




. Business combination (2/2)

9

Accounting for owners


(whether transfer gains or losses are recognized or not)

Owners of combining entity

Owners of entity combined

consideration

Entity accepting business

(combining entity)

Company B

Transferred

business

Business a


Entity divesting business

(entity combined)

Company A


Accounting for business divestiture

Continuity or liquidation of investment

Whether transfer gains or losses are recognized or not

Accounting for business combination

Acquisition or combining of interests

Whether goodwill is recognized or not

Relationship between accounting for business combination and accounting for

business divestiture

Business


Transferred

business

Business a




. Business Divestiture


10




. Share
-
based Payment (1/2)

Scope




1.
Share
-
based compensation arrangements with
employees or directors

2.
Share
-
based payment transactions with those
other than employees or directors when goods or
services are received

3.
Arrangements in which a company’s own equity
instruments are used as consideration

11

Recognition and Measurement


Recognition


-

Compensation cost should be recognized over the
period for services rendered


-

Credit entries are recorded in “net assets”


-

When exercised : reclassified into owner’s equity


Measurement


-

Fair value at the time of grant


-

Not reviewed afterwards




. Share
-
based Payment (2/2)

12




. Presentation of Net Assets

on the Balance Sheet

Background

Trigger : Controversy over the credit entry of Stock option

Harmonization with international accounting standards

Overview

Net Assets consists of


Owners’ equity


attributable to
shareholders of the
parent company


Other components:OCI, Warrants issued, Minority
interest

13




. Presentation of Net Assets on
the Balance Sheet

Net assets

Ⅰ Owners


equity


1 Common stock




×××


2 Capital surplus




×××


3 Retained earnings




×××


4 Treasury stock



×××



Total owners


equity




×××

Ⅱ Accumulated other comprehensive income


1 Net unrealized gains or losses on available
-
for
-
sale securities


×××


2 Deferred gains or losses on hedging instruments


×××


3 Foreign currency translation adjustments


×××


Total accumulated other comprehensive income


×××

Ⅲ Warrants issued

† † † ††† ††† ††† †



ퟗ×


Ⅳ Minority interest



†††† ††† ††† † †††


ퟗ×



呯瑡氠湥琠慳s整e †† ††† † ††† †††



ퟗ×


14




. Statement of Changes in Equity

Background

Newly required by the New Company Act


Convergence with international accounting
standards

15

Background



The quarterly financial reporting system will be
introduced to Japanese listed companies by
Securities and Exchange Law





. Quarterly Financial Reporting

16


-

. Basic position of ASBJ on
international convergence

The ASBJ agrees with the objective of international
convergence to high
-
quality accounting standards, since it is
beneficial to respective capital markets around the world.

In order to promote international convergence to high
-
quality
accounting standards, the ASBJ will establish closer
relationships with other accounting standard setters around the
world.

The ASBJ believes that the international convergence to

high
-
quality accounting standards should be attained through
the process of assessment and selection by market participants
.


17


-

. Launch of the project

(1)
Sir

David

Tweedie,

chairman

of

the

IASB,

proposed

the

joint

project

for

convergence
.

(July

2004
)


(2)
The

ASBJ

replied

that

it

agreed

with

the

proposal

to

launch

the

joint

project
.

(September

2004
)


(3)
Sir

David

Tweedie

visited

Japan
.

The

ASBJ

and

the

IASB

started

talks

about

the

joint

project
.

(October

2004
)


(4)
The

ASBJ

and

the

IASB

agreed

to

the

key

elements

on

proceeding

the

joint

project
.

(January

2005
)

18


-

. Key elements for joint project

(1/2)



Key elements agreed


Utilize their respective conceptual frameworks or basic
philosophies to choose the better accounting standards.

Address the differences in their respective conceptual
frameworks later in the project as a separate subproject, at a
time agreed by the boards.

Consider their respective due process requirements in arriving at
agreement.

The ASBJ will undertake a study to get an overall picture of
major differences between the respective standards and will
identify topics to be discussed.

Adopt a phased approach to the comparative reviews of
differences in individual standards.

19



Key elements agreed (continued)


The scope of the first phase is the standards in place as of 31
March 2004, with the following exceptions;



Standards under review or intended to be reviewed in the
joint projects between the IASB and the FASB.


Standards that are divergent owing to differences in the
respective conceptual frameworks or basic philosophies.


Standards recently developed.


Standards whose requirements are subject to legal
restrictions or those currently considered inapplicable in
Japan.


-

. Key elements for joint project

(2/2)

20

The ASBJ and the IASB held initial meeting on
March 9 and 10, 2005 in Tokyo.




Contents


Basic philosophies underlying Japanese accounting
standards (based on our discussion paper
“Conceptual Framework of Financial Accounting”)

Comparison between Japanese accounting
standards and IFRSs

Topics to be addressed in the first phase of the
project


-

. Initial meeting

21

Topics addressed in the first phase of the project




1


Measurement of inventories

IAS2




2


Segment reporting

IAS14




3


Related party disclosures

IAS24




4


Unification of accounting policies applied to




foreign subsidiaries

IAS27




5


Investment property

IAS40





Each topic will be deliberated within a year or two.



There may be additional topics in the first phase.


-

. First phase agenda

22


Second meeting was held in London on September 23.


Agenda

Details of progress concerning the five topics in the
first phase

Additional topics in the first phase and other

Conceptual frameworks (Recognition and
measurement)

Hedge accounting, Asset removal obligation


-

. Second meeting

23

Our ultimate goal is international convergence to a
set of high
-
quality accounting standards.

Attention should be paid to the
de facto

rules
prevailing in capital markets.

Accord with the constituents of global markets
should be more strengthened.


-

. Our thought

24

Accounting Standards




Decision
-
making usefulness of financial reporting


(overall)


XBRL





Enhancing the usefulness of financial reporting


(user of XBRL)


-

. Objectives of

Accounting Standards and XBRL

25

Easy retrieval of necessary information

Enhanced comparability of financial analysis

Enhanced affirmation of consistency among data

Availability of comparative reports


-

. Contribution of XBRL

26

Accounting Standards





Conceptual and theoretical approach


XBRL




Series of interpretation


-

. Different Approach

27

No change for the approach of developing Accounting
Standards

Accounting Standards Setters do not interfere with
developments of taxonomy of XBRL

Wait for developments of taxonomy to reach the
comfortable level








-

. Developments of XBRL
Taxonomy

28

Single Standards in the world is the ultimate
goal

XBRL may function as a bridge

Future role of FASF?


-

. Expectation