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The International Accounting Standards Board (IASB) and the Accounting Standards Board of Japan (ASBJ) have announced their achievements under their August 2007 Memorandum of Understanding (MoU), known as the Tokyo Agreement, to improve International Financial Reporting Standards (IFRSs) and Japanese generally accepted accounting principles (GAAP) and to bring about their convergence.

The boards, meeting in Tokyo on 6 and 7 June 2011, also announced their intention to deepen their co-operation in preparation for a decision around 2012 on the mandatory application of IFRSs in Japan. Some Japanese domestic companies are already permitted to prepare financial statements in accordance with IFRSs.

At the meeting Sir David Tweedie, chairman of the IASB, and Ikuo Nishikawa, chairman of the ASBJ, expressed their belief that their boards’ work for the convergence of their standards was an important step on the path towards Japan’s possible adoption of IFRSs and noted that the ASBJ’s continuing participation in the IASB’s standard-setting process contributes significantly to the development of a single set of high quality global accounting standards. A summary of the results of the Tokyo Agreement so far is attached. This initiative will continue to seek further convergence of IFRSs and Japanese GAAP.

"Over the past four years, the ASBJ has not only changed many Japanese standards to conform to their international equivalents but under Ikuo’s direction has also been very influential in the current debates on new IFRSs. Our attention now turns to deepening the relationship between the IASB and the ASBJ in preparation for a decision in 2012 on Japanese adoption of IFRSs," says Sir David Tweedie.

The representatives of the boards also discussed the remaining projects as described in the MoU between the IASB and the US national standard-setter, the Financial Accounting Standards Board (FASB), including revenue recognition, leases, financial instruments and insurance contracts, as well as interpretation and practical issues relating to the voluntary application of IFRSs in Japan.

As Sir David Tweedie and two other members of the IASB, Warren McGregor and Tatsumi Yamada, will end their term of duty at the end of this month, Ian Mackintosh, vice chairman-elect of the IASB, and Takatsugu (Tak) Ochi, member-elect of the IASB, also took part in the meeting to help to maintain the close relationship between the IASB and the ASBJ. The IASB’s director of international activities, Wayne Upton, who has also been involved in this initiative, was also present at the meeting.

In working together under the Tokyo Agreement the boards have strengthened their relationship and made good progress towards the goal of global accounting standards for use in capital markets. The IASB and the ASBJ agreed that they should continue the effort for convergence and establish a closer relationship.

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