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1、Tutorial 6. Comparative Accounting Systems, China & East Asia.Solution Notes.Some notes on Japanese Accounting Influential role of the central government Publicly listed corporations must file statements with the Securities Division of the Ministry of Finance and follow the recommendations of the Se
2、curities and Exchange Law. The Diet obtains advice from the Business Advisory Deliberations Council (BADC), a body composed of business people accountants and people from the Ministry of Finance.BADC Accounting Principles General principles - True and Fair View; Orderly Bookkeeping; Distinction betw
3、een Capital and Earnings; Fair Presentation; Continuity; Conservatism; Consistency Emphasis on profit measurement Strong adherence to costs Sources of Regulation JAPANJapan employs what has been called a “Triangular System” There are three laws which prescribe financial accounting and reporting in J
4、apan; the Commercial Code, the Securities and Exchange Law, and the Corporate Income Tax Law. Several related laws and regulations for them are also applicable.Accounting Characteristics JAPAN Contribute to national economy Conformity with tax treatment Little demand for disclosure Prescriptive rule
5、s judgment Conservatism, income smoothing Multiple accounts:o Per commercial codeo Per SELo English language version V. Slow development of standards Accounting regulatory shift More accounting standards established Changes in accounting standard setting process New auditing standards (2002) Reconci
6、liation of domestic standards with IAS (IFRS) Recognition of accounting as an infrastructure of market-oriented economy Private standard setting organization: ASBJ Some Differences in Accounting Practice. U.S.JapanRevenue RecognitionInstallment and cost recovery-first methods permittedInstallment me
7、thod common when collection period exceeds two yearsInventoriesMost firms use FIFO or LIFOMost firms use weighted average methodDepreciationStraight line for financial reporting accelerated method for tax reportingDeclining method for financial reporting and taxIntangible assetsInternally developed
8、intangibles expensedInternally developed and externally purchased can be expensed or capitalised and amortised.Employee benefitsLiability recognised for unfunded accumulated benefitsSeverance benefits more common. Estimated amount expensed each period.Income TaxExpense based on book income amounts.
9、Deferred tax expenseNo deferred tax. Income tax based on taxable income.LeasesOperating leases not capitalised, capital leases capitalisedAll leases treated as operating leases.Reasons for differences in profitability and risk ratios between US and Japanese companies. Differences in accounting pract
10、ice. The role of the Keiretsu in business strategy, funding and need for consolidation Attitudes to and availability of debt (remember culturally there were different attitudes towards risk and debt). different patterns of stock ownership stock price changes appear to be related more to changes in r
11、eal estate values than to the operating performances of individual companies.KeiretsusMany Japanese companies operate in corporate groups called keiretsus. Each keiretsu typically comprises firms in eight or ten different industries. The companies usually hold stock in each other (25% to 30%) The ob
12、ject is not control or influence but operating links Each keiretsu normally includes a bank Stock OwnershipThere are considerable differences between the US and Japan in terms of stock ownership. One third of Japanese companies shares is owned by the members of the keiretsu One third is held by bank
13、s and other financial institutions outside the keiretsu One third is held by other individualsThe large percentage of inter-corporated stock holding has historically reduced the concern about keeping investors happy by paying large dividends or reporting increasing earnings per share.The emphasis in
14、 Japan has been to secure an increase in market share. The Japanese economy experienced significant recession since the 1990s. Japanese management practice used to be emulated across the world and discussed in most of the prestigious journals and business schools. As a consequence doubts have emerge
15、d concerning “Japanese-style management. However while the Japanese economy has stagnated, companies in the U.S., England, Australia, Canada and other Anglo-Saxon countries have significantly increased their earnings. As a consequence, there has been a paradigm shift from so-called “Japanese-style management” to “Anglo-Saxon-style management,” a style of management that maximizes shareholder value. Accordingly, this shift in thinking pointed to the need for Japanese-style management to be reformed. However in light of corporate colla
