ASSIGNMENT

MARCH 2020 SEMESTER

SUBJECT CODE : BMAF 33104

SUBJECT TITLE : ADVANCE FINANCIAL ACCOUNTING

LEVEL : UNDERGRADUATE LEVEL

DETAILS OF STUDENTS

S/NO. STUDENT NAME STUDENT ID NO.

1. NAVIEN A/L GANESON B17101058
2. DINESHA NAIR A/P RAJANTHRAN B17101087
3. RAMYA SRI A/P PARAMANATHAN B17101039
4. PRABAVATHI A/P KARUNANITHI B17080628

PROGRAMME : BSC (HONS) ACCOUNTING & FINANCE

LECTURER : NORHASNI BT ABDUL RAZAK

FACULTY : FACULTY OF BUSINESS AND MANAGEMENT

SUBMISSION DATE : 5 JUNE 2020

1933 WORDS

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TABLE OF CONTENT

CONTENT PAGE NUMBER

Report on the Timeline of Accounting 3

Development of Japan

Harmonization Effect on the Changes of 4-5

Accounting Practices in Japan

Potential Implication of the Culture and 6-7

Political System in Japan

Conclusion 8

References 9

Appendix 10-13

Report on the Timeline of Accounting Development of Japan

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The modern era for Japan could be said to start in 1871 when the central government provided
new money whose worth depended on the universal gold framework, which started being given
by the Japanese national bank set up in 1872-at the time dependent on the American national
bank built up in 1865 after the unsteadiness brought about by their common war, like the
circumstance at that point in Japan. Until Japan opened up to global markets in the mid19th
century, there was a time of free-showcase insecurity and alteration before foundation of a
managed national bank-based cash based capital stream framework. Bookkeeping works on
looking like globally acknowledged ones like twofold passage credit and charge were utilized yet
not across the board. First Japan needed to move into a globalized exchange and trade
framework, which happened reasonably quickly. Japan is regularly observed as following
American bookkeeping rehearses, and that is most likely more the case now than any time in
recent memory. Particularly with progressively universal normalization and guideline of
business, capital and bookkeeping rehearses.

One approach to see this is from the viewpoint of expert bookkeeping practice and measures in
Japan, typically considered to adhere to set up ensured proficient bookkeeping guidelines. The
JICPA was self-governing until 1966 when another CPA law required all CPAs to join the
JICPA under oversight of the Ministry of Finance. At that point during the 1970s, reviewing by
CPAs got obligatory. This shows a consistently reinforcing and control of the bookkeeping
calling in Japan with government and other institutional partners. From 20s The Accounting
Standards Board of Japan (of the Financial Accounting Standards Foundation) was built up as a
bookkeeping norms setter of Japan. The BAC distributed the "Supposition concerning Revisions
of the Auditing Standards" and the "Feeling concerning Revisions of the Interim Auditing
Standards." Next is ASBJ discharges Practical Solution on Accounting for Leases by Lessees
under the New Measures to Promote Investment in Facilities Using Lease Methods. ASBJ also
issues Practical Solution on Accounting for Risk Sharing Pension Plan and Practical Solution on
an adjustment in deterioration strategy because of Tax Reform 2016. ASBJ continuing on
discharging Accounting Standards for Fair Value Measurement, and so forth. This 2020 ASBJ
issues the Practical Solution on the Treatment of Tax Effect Accounting for the Transition from
the Consolidated Taxation System to the Group Tax Sharing System.

Harmonization Effect on the Changes of Accounting Practices in Japan

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In Japan, international harmonization of accounting standards changed rapidly through the
Accounting Big Bang. The changes in accounting practices occurred from 1997 to 1999 had
several effects on the Japanese companies. One of the effects is corporate restructuring.
According to Itô (1998, 30), there are two reasons why corporations and short-term employment
will have serious repercussions on reported financial due to the introduction of new accounting
standards. Firstly, the equity and assets of most corporations' owners will grow with the
introduction of equal value accounting, which will trigger their equity return (ROE) and asset
return (ROA) to decline. Institutional investors won't allow that, so companies won't have any
choice but to obtain profits from selling their cross-held stock so their ROE or ROA won't fall.
Secondly, business organizations will not be able to resist consolidation because the current
requirements require them to integrate the outcomes of certain already unconsolidated
underperforming firms. Keidanren representatives have found out that as businesses extend equal
value accounting to cross-shareholdings, the equity of owners will grow tremendously, which
would allow financial metrics such as ROE to deviate dramatically from international norms. As
a result, a company's credit rating can fall, leading to capital raising problems (Kino 1999, 91).
Several international financial firms have increased their footprint in the Japanese market since
1997, with the Big Bang financial reforms deregulating the Japanese capital markets and
promoting greater involvement by foreign businesses. Despite recent rise in foreign companies'
acquisitions, some investors have still not been able to convince themselves that they have
established all financial risks of firms, even with a thorough proper research method. The second
effect is revision to post-employment benefits (Gordon B, 1999). Several Japanese businesses are
evaluating their current post-employment plans for future changes as a part of the introduction of
the latest pension accounting standard. Since businesses are responsible for making up for any
shortcomings in real and planned returns on pension plan investments, they bear a great risk
when deciding pension benefit levels now that will not be compensated until a distant future.
Several businesses have agreed to fix their pension problems efficiently and report financial
reports on benefits long before the current accounting framework is introduced. Tokyo Gas, for
example, must report gross spending of 14 billion yen for fiscal years 1998 and 1999 to ensure
that the organization has already accepted the correct amount of responsibility before the new
requirement comes into effect in fiscal year 2000. Next, is information concerning Corporate
Income Tax. It has been found that changes to the corporate income tax structure have increased

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the gaps in benefit before corporate income tax and other exemptions and taxable profits from
the financial statements (Report on the Internationalization of Business Accounting in Japan,
2004).In addition, corporate income tax timing payments etc. do not conform to the amount of
taxable earnings for the fiscal year before company income tax reductions etc. These are some of
the effects connected with the changes of accounting practices in Japan.

Potential Implication of the Culture and Political System in Japan

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According to Hofstede (2001, p.3), “Culture is the collective programing of the mind that
distinguishes the members of one group or category of people from others”. Based on the
cultural aspect of Hofstede, collectivism is the Japanese society's cultural characteristics that
distinguish its accounting system, activities, and organizational culture. In Japan, "dantaiisbiki"
or group consciousness is what the Japanese consider a cultural norm. According to Young
(2013), group consciousness appears to see itself as a collective, dependent on one another,
rather than individuals. Thus, this encourages the workforce to concentrate on common interests
and helps to avoid public disputes. However, this affected the auditing profession because it is
viewed because part of the company and as having the duty to protect the interests of the
organization and not the public. According to Young (2013), then the need for independent
auditors within the organization is a foreign idea and the definition is often dismissed by
Japanese companies. In addition, corporations become more inwardly centralized in collectivist
cultures that can establish secrecy, resulting in less revealed information. Next, Japan is more
towards statutory control in terms of accounting values (Gray, 1988). One of the characteristic of
their culture is that the Japanese considers the government as the highest authority although the
independent accounting board exists.

The effect on political system in Japan has allowed the financial services sector to grow rapidly
and, as a result, the output of the financial economy has led to economic volatility previously
guided by the real economy (Ogawa and Kitasaka, 1998). Due to the circumstances of the last 20
years of the 20th century, the Japanese financial system's deregulation changed the funding
method of Japanese listed companies from indirect to direct. The deregulation policy described
above is referred to as the Japanese version of the Big Bang. The transition that Japanese
accounting systems have undergone since 1997 is widely referred to as the "Big Bang
Accounting."

Figure 1 shows trends in financial assets, financial liabilities and equity ratios of companies
across 33 industries; excluding banks listed on the Tokyo Stock Exchange and the Osaka Stock
Exchange from 1985 to 2001. The equity ratio increased from 28.5 per cent in 1985 to 42.2 per
cent in 2001.In accordance with this trend, the ratio of financial liabilities declined from 57.2%
in 1985 to 45.9% in 2001. The upward shift in the equity ratio illustrates the fact that
management prefers equity finance instead of debt financing by evaluating the merits of capital

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costs in the light of the circumstances of financial liberalization and globalization. In addition to
these factors, the ratio of financial assets did not change substantially from 1985 to 2001.
However, the ratio was higher than 56 per cent over the era and hit 61.8 per cent in 1990 during
the bubble economy. Based on the relatively high ratio of financial assets to the total assets of
Japanese listed companies, the valuation of financial assets was considered an important issue for
investors to make informed economic decisions. The data did not include information on the
appreciation of marketable securities for trading purposes and investments in mutual securities
between business partners. The most critical problems were the identification and calculation of
financial instruments, which were not included in the data due to lack of accounting standards.
As a result, investors did not have enough information on the results of the financial risk
management of Japanese listed companies.

Figure 1

Conclusion

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In conclusion, there are many changes occur in the effect of harmonization on the accounting
practices like the introduction of equal value accounting, which will trigger their equity return
(ROE) and asset return (ROA) to decline, a company's credit rating can fall that cause leading to
capital raising problems, changes to the corporate income tax structure have increased the gaps
in benefit before corporate income tax and other exemptions and taxable profits .his encourages
the workforce to concentrate on common interests and helps to avoid public disputes. In the
implication of culture system, it has encourages the workforce to concentrate on common
interests and helps to avoid public disputes but this affected the auditing profession because it is
viewed from part of the company and as having the duty to protect the interests. The effect of
changes of accounting practices on political system in Japan has allowed the financial services
sector to grow rapidly and, as a result, the output of the financial economy has led to economic
volatility. Modern law governing banking and cash transactions plus the requirements for
cutting-edge Japanese expert accounting have been set when Japanese affairs had been managed
inside the conflict towards Japan, specifically with the aid of the Americans. These show a step
by step strengthening and manage of the accounting profession in Japan with government and
other institutional stakeholders.

References

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1. Gordon, B. (n.d.). Retrieved June 02, 2020, from
http://wgordon.web.wesleyan.edu/papers/jacc1.htm
2. Urasaki, N. (2014, January 27). Institutions and accounting standard transformation:
Observations from Japan. Retrieved June 03, 2020, from
https://www.sciencedirect.com/science/article/pii/S175530911300052X
3. (2020). Retrieved June 3, 2020, from Google.com website: https://www.google.com/url?
sa=t&source=web&rct=j&url=https://www.iasplus.com/en/binary/resource/0406ifrsjapan
gaap.pdf&ved=2ahUKEwix4tGm_uPpAhVj7XMBHVPmAAEQFjAAegQIAhAB&usg=
AOvVaw3sI__GeUb0Ji9PfLnpnjJi

4. History and Background: Development of CPA Profession. (n.d.). Retrieved June 04,
2020, from https://www.hp.jicpa.or.jp/english/accounting/history/development.html

5. History of Accounting and Auditing System. (n.d.). Retrieved June 04, 2020, from
https://www.hp.jicpa.or.jp/english/accounting/history/index.html

6. DOYLE, H. (n.d.). Themes in the History of Accounting in Japan： a short content-based

program. Retrieved June 04, 2020, from
https://www.academia.edu/20368676/Themes_in_the_History_of_Accounting_in_Japan_
a_short_content-based_program

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Appendix

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