ACCT 3510 International Accounting KOKUSAI KAIKEIGAKU

1. ACCT 3510 International Accounting KOKUSAI KAIKEIGAKU

2. Bringing International Accounting Issues into the Classroom: The Case of Japan Hassan A. Said, PhD School of Business Austin Peay State University

3. "Land of the Rising Sun". 日本国 Nihon-koku Japan

4. Bamboo Forest, Kyoto

5. Tokyo From Above

6. Environmental Influences • Political • legal • Economic • Cultural • Infrastructure/Natural and Created

7. Key to Understanding International Accounting • Political, Economic, Cultural and Infrastructure Influences on: • External Reporting • Taxes/Capital Markets/Gov. Regulation/Standard Setting/Reporting Requirements/Users • Internal Reporting • Planning and Decision Making • Control • Performance Evaluation

8. Accounting Topics • External Accounting • Standard Setters, Preparers and Users • Underlying Institutional Structures • Required reports • Internal Accounting • Decision Rights Assignment • Planning and Control • Performance Measurement and Evaluation

9. Topics-Environment Matrix

10. ABOUT JAPAN (NIHON NI TSUITE ) Japan has three laws that are firmly interrelated in their accounting objectives and often referred to as the Triangular Legal System.

11. TheseTriangular Legal laws prescribe the financial accounting and reporting system in Japan: • The Commercial Code, • The Securities and Exchange Law • The Corporate Income Tax Law.

12. 1890-Commercial Code of Japan was enacted. • 1948-Securities and Exchange Law was enacted, and CPA Law was enacted. • 1973-The International Accounting Standards Committee (IASC) was established, of which the JICPA was one of the founding member. • 2001-The Accounting Standards Board of Japan (of the Financial Accounting Standards Foundation) was established as an accounting standards setter of Japan

13. U.S.-Japan Comparison Comparison between U.S. and Japanese GAAP is the most frequently asked question. Many of the differences have been eliminated, yet many differences still present, especially in rules implementation and interpretations of similar literature

14. The Accounting Standards Board of Japan (ASBJ) • Established in July 2001 as a • private-sector organization • Accounting standards developed by the ASBJ • are to be authorized by the Financial Services Agency

15. In 2001, the Financial Accounting Standards Foundation (FASF) was established through ten leading private-sector entities including the JICPA. The ASBJ was organized under the auspices of the FASF as an independent and private-sector entity to develop accounting standards in Japan. ASBJ Continued

16. External Accounting-Environment • Standard Setting Process • U.S. -- FASB – ‘Private’- http://www.fasb.org/ • China, Korea & Japan – varying levels of govt. control • http://en.casc.gov.cn/internet/internet/en/newsreview/2006nzhrhkjzhzzhdjghyhdbg.html • International Accounting Standards Board • /http://www.iasb.org/Home.htm Use of comment letters for current projects • Users of Statements • legal/cultural driven • Compliance - Culture driven • http://www.geert-hofstede.com/

17. External Accounting-Topics • External Reporting Differences • U.S., U.K. -- Tax  Financial • Japan, Germany -- Tax = Financial • Differences in Debt and Equity Classifications • Korea vs. U.S. (short vs. long term) • Differences in goodwill treatment • U.S. vs. Japan • Differences in asset revaluation • US. vs. Brazil or Mexico (or IFRS)

18. Internal Accounting • Decision Rights Assignment • Negotiating Joint Ventures – China and India • Planning and Control • Complications of Global Operations-foreign exchange issues • Co-location of Knowledge and Rights=Joint ventures vs. wholly owned subsidiaries • Performance Evaluation • Multiple Currency Issues- operating risk management • Cross-border Decision Rights Issues-FCPA • Transfer Pricing in International Settings

19. Internal Accounting-Environment • Economic/Political-Planning and Control • International Taxes and Treaties • NAFTA (http://www.dfait-maeci.gc.ca/nafta-alena/menu-en.asp/) • Foreign Trade Zones (http://ia.ita.doc.gov/ftzpage/) • Transfer Pricing • Decision Rights Issues- APA agreements: (www.irs.gov/businesses/international/) • Political/economic- treaties (www.state.gov/) • https://www.cia.gov/library/publications/the-world-factbook

20. Internal Accounting-Environment • Economic/Political Continued • Risk Management- e.g. threat of nationalization • Financial -- http://www.eiuresources.com/ras/help_about.asp • Operational – http://www.irmba.com/ • Corruption • Foreign Corrupt Practices Act –ethics issues http://www.usdoj.gov/criminal/fraud/fcpa/ • Corruption index--http://www.transparency.org/

21. Internal Accounting-Topics • Performance Evaluation (Inter.J. of Acct., 34, #1, pp.49-70) • Japan ROA < U.S. ROA • low margins, • focus on market share, emphasize target cost • Japan ROE > U.S. ROE • high debt levels • keiretsu organization or chaebol (korea)

22. The Solution to Minimize Differences! The ASBJ and the International Accounting Standard Board (IASB) announce Tokyo Agreement on achieving convergence of accounting standards by 2011

23. Where to get more information • Journals - International • International Journal of Accounting • Journal of International Accounting Research • Advances in International Accounting • Journal of International Business Studies • Journals - AAA • Accounting Horizons • Issues in Accounting Education • Other • Management Accounting • Journal of Accountancy • Economist

24. For more information about the ASBJ, visit www.asb.or.jp/index_e.html For more information about the FASB, visit www.fasb.org.