The legal backing for accounting standard-setting in Japan: A historical review

Abstract

The purpose of this study is to construct a historical narrative of the development of the standard-setting in Japan, where the main standard-setting bodies were changed from public to private sector entities. This study specifically examines the unique coexistence of four sets of accounting standards through the lens of legality. My findings show that four sets of accounting standards are formalized into the domestic legal system through the endorsement by the Financial Services Agency of Japan, although differences in the standard-setting processes and patterns of public delegation exist. This finding also suggests an interesting example of hybridization between legally incomplete ex ante delegation to private sector standard-setting bodies and ex post endorsement by the public sector.

Using arguments and myths to lobby over controversial accounting issues: evidence from Japan

“…Japanese culture has been largely characterized by statutory and bureaucratic control under the strong influence of the Japanese Government (Figure 1, which shows the institutional framework) (Benston et al , 2006, p. 170; Tsunogaya et al , 2015). As Sanada (2018) suggests, the Japanese Government plays a major role in legalizing and legitimating accounting standards. Unlike the Financial Accounting Standards Board (FASB), which is the legitimated standard-setting body in the USA, “[ t ]he legality of accounting standards and standard-setting bodies [the ASBJ] in Japan [is] authorized by the FSA” (Sanada, 2018, p. 353).…”

“…As Sanada (2018) suggests, the Japanese Government plays a major role in legalizing and legitimating accounting standards. Unlike the Financial Accounting Standards Board (FASB), which is the legitimated standard-setting body in the USA, “[ t ]he legality of accounting standards and standard-setting bodies [the ASBJ] in Japan [is] authorized by the FSA” (Sanada, 2018, p. 353). Owing to the strong influence of the Japanese Government, there is a power struggle between the regulatory bodies in the accounting standard-setting process in Japan.…”

Histories of accounting standard-setting – an introduction

“…First, Sanada's (2018) article examines the Japanese system focussing on the difficult question of how Japan has adapted in the IFRS era, given that, historically, Japan's accounting rules have been enshrined in law. The country already had a complicated intertwining of its commercial code, securities law and tax law, which had to change to accommodate a desire to approach IFRS, giving rise to four sets of accounting rules.…”