19 April 2004|
Given the globalisation of capital flows through capital markets, and the diversification and increasing sophistication of economic transactions, there is an urgent need to develop a single internationally accepted set of accounting standards that ensure the comparability of corporate financial statements. Especially, the presence of the International Accounting Standards Board (IASB) is growing and its influence is being felt in many quarters.
The business community, which is mainly composed of preparers, recognises that it must contribute to the IASB's activities on its own initiative. UNICE and Nippon Keidanren support the need for international cooperation on accounting standards and make the following joint statement from a standpoint of business practice.
Proposals on accounting standards now being studied by the IASB include those that may lead to material changes in the basic concepts of current standards. The need for these changes has not been proved by clear and unambiguous research among preparers, users, auditors and financial markets supervisory bodies.
We note that the IASB intends to adopt as fundamental for financial accounting a full fair value approach, which is recognised especially in the proposals for "Performance Reporting (Comprehensive Income Reporting)", "Accounting for financial instruments", and "Changing the accounting for post-employment benefits including pensions".
We strongly oppose the IASB's further consideration of the "Full fair value concept" without further research on the needs of users and preparers, and the economic consequences of this fundamental change in concepts because of its inherent theoretical and practical problems.
In preparing the standards, the IASB should recognise the concerns expressed by market participants.
In the current stage, not only preparers but also auditors, users, politicians, and others all over the world have expressed dissatisfaction with the IASB.
The IASB must improve its governance structure and the process of developing standards in order to be recognised as a genuine, legitimate international institution. In particular, a structure should be created to ensure that in the study of standards by the IASB, the opinions of capital markets are properly considered in order to be accepted by each market.
The International Accounting Standards Committee Foundation (IASCF), which is a steering body of the IASB, invited public comments on its Constitution review by February 11, 2004.
We submitted comments respectively to make a useful contribution to the IASB's improvement with the aim of becoming an appropriate international institution. We greatly hope that the IASCF would revise the Constitution in conformity with our comments.
In line with the globalisation of capital markets, we fully support a convergence of accounting standards to ensure the comparability of financial statements.
At this stage, however, it is difficult to achieve full convergence within the short term by 2005 because differences remain between countries in a number of areas, including capital markets systems, and the relationships between accounting standards and company law and tax law.
In order to reach the goal of sharing a single set of international accounting standards, Europe and Japan should join forces to influence the definition of international accounting standards that are likely to best serve the public interest. Given the present situation and before reaching convergence, joint efforts could be made to allow for an interim phase of mutual recognition.
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UNICE is the official voice of more than 16 million small, medium and large companies in Europe. Active in European affairs since 1958 UNICE's members are 36 central industrial and employers' federations from 29 countries, working together to achieve growth and competitiveness in Europe.
Japan Business Federation is a comprehensive economic organization. Its membership of 1,584 is comprised of 1,268 companies, 126 industrial associations, and 47 regional employers' associations (as of July 17, 2003). The mission is to achieve a private sector-led, vital and affluent economy and society.