IntroductionUnder the leadership of the International Accounting Standards Board (IASB), efforts arecurrently under way to promote international convergence in business accounting, whichcomprises the infrastructure of capital markets. In the past, uniform business accountingmethods particular to major markets were developed as shared standards to present dataon enterprise activities to investors and other stakeholders, in formats which were bothobjective and which enabled comparison, but as corporate activities become increasinglyglobalized, uniformity is now being sought on an international level. This trend wasevident in the1990s, when the IMF imposed the adoption of international accountingstandards as a condition for loans to Asian countries such as Korea, as well as in China’sactions to revise its practices to conform with international accounting standards when it joined the WTO.Traditionally, markets have mutually accepted each other’s business accounting standardsso as to allow international investment and capital procurement to be conducted smoothly.However, in recent years there has been greater demand for integration of financialreporting content. In 2000, the International Organization of Securities Commissions(IOSCO) announced its support of the International Accounting Standards (IAS)system—which the International Accounting Standards Committee (IASC) had beenworking to formulate–as the accounting standards to be applied in multinational fundraising. As a result, IAS began to be recognized internationally as the actual standardsthat apply to corporations. In 2002, the EC
prescribed the application of InternationalFinancial Reporting Standards (IFRS)
to approximately 7,000 corporations in its market,in an effort to standardize accounting practices used in EU
markets, in connection withEU market unification.Business accounting methods developed in the capital markets of individual countriesover a number of years, based on the particular systems and practices unique to eachmarket. In Japan, business accounting principles were established in 1949. Since then,Japan’s business accounting system has grown from individual financial statements,under a triangular system
in which the Securities Exchange Law, Commercial Code, and
The European Commission: the administrative body.
The accounting standards that were created by the IASB are collectively called the IFRS, and consist of the IAS of the IASC (established in 1973, and the predecessor of the IASB until 2001), and the narrowly-defined IFRS, established by the IASB.
The European Union: the greater European economic region.
Triangular System: The Securities Exchange Law (whose objective is to protect investors) requires theuse of “business accounting standards that are recognized to be generally fair and appropriate” (JapanGAAP: Generally Accepted Accounting Principles in Japan) as the basis for disclosure of securities reports,etc. The Commercial Code (whose objective is to adjust interest among creditors and shareholders)stipulates that “fair accounting practices should be taken into consideration” in the preparation of accounting records. In reality, records are prepared in accordance with the Japan GAAP. Under theCorporate Income Tax Law (whose objectives are fair taxation and tax revenue collection), taxable income3