Harmonization across borders. A study of Japanese views on accounting from an international perspective

Abstract

Background and research problem discussion: The augmented globalization creates an increased need for communication in terms of language, awareness of cultural differences and domestic customs. However, financial communication, such as accounting and financial results is just as important to master. There have traditionally been two different accounting traditions in the world, the Anglo-Saxon and Continental accounting traditions. Though, during the last few decades the Continental accounting tradition has adapted parts of the, at present, dominating Anglo-Saxon tradition. For example do both of the two global accounting standard-setters FASB and IASB with their accounting frameworks US GAAP and IFRS origin from the Anglo-Saxon accounting tradition. The aim with these two standard-setters has been to regulate accounting on an international level in order to attain harmonization between the accounting systems of different countries. However, domestic accounting traditions influence the interpretation of global accounting standards and make a harmonization difficult. Accounting researchers state that increased accounting harmonization can only become efficient when all countries interpret identical standards in the same way. Purpose: The purpose of this thesis is to survey the basic views on Japanese accounting from an international, in particular Swedish, perspective. Sweden has already implemented IFRS and there is an ongoing discussion in Japan about implementing the standards of IFRS to a greater extent. By focusing especially on the items revenues and provisions, the author wishes to survey how economic events related to these items are interpreted in Japan. The author’s hope with this thesis is to increase the knowledge of Japanese accounting and also to improve Japanese and Swedish companies’ financial communication. Method: The thesis is based on a qualitative study where in total four Japanese and two Swedish respondents were interviewed in their respective offices in Tokyo and Yokohama, Japan. The respondents all work for international companies in Japan and were selected because of their knowledge, experience and insight in Japanese as well as international accounting legislation. Secondary data such as the standards of IFRS, articles and academic literature developed by accounting researchers have also been used. Empirical result and conclusion: Concerning accounting practices, Japanese and Swedish revenue recognition is most likely similar and in congruence with IFRS. However, Japanese leasing, depreciations and provisions for paid vacation and pensions differ between the traditional Japanese accounting and that of IFRS. Compared to Sweden, Japanese depreciations on accounts receivables and inventory stocks are not practiced at the same extent as in Sweden. Finally, Japan has been influenced to a large extent by US GAAP which is more detailed than IFRS. There is therefore a risk that an implementation of IFRS may cause confusion and extra work for Japanese companies. The reason is that the principle-based framework involves a lot of judgements, which Japanese companies are not used to. Japanese companies will therefore most likely need additional external help and consultation from the accountancy/audit firms. Finally, it would most likely be favourable for all international companies if US GAAP and IFRS could unite into one global framework. It remains to be seen what will happen, but it is obvious that the larger Japanese companies are interested in taking part in the work to increase global accounting harmonization.