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Friday, January 24, 2014

J-GAAP: Source of Japanese GAAP

The Financial Instruments and Exchange Law (FIEL) prescribes that the registrants comply with the generally accepted accounting principles (standards) unless the related Cabinet Ordinances specifies certain treatments.
The Cabinet Ordinances specifies that the generally accepted accounting principles consists of (1) accounting principles that are set forth by the Business Accounting Council (BAC) and (2) accounting standards that are set forth by qualified independent standard setting body. The Accounting Standards Board of Japan (ASBJ) is designated as such a qualified independent accounting setting body.

The Company Act requires that companies comply with the generally accepted accounting practice in preparing their accounts. Because the FIEL specifies that the BAC's accounting principles and the ASBJ's accounting standards are part of the generally accepted accounting principles, such accounting principles and standards are also part of the generally accepted accounting practice under the Company Act.

The IFRS designated as generally accepted by the Commissioner of the Financial Services Agency is also another set of generally accepted accounting principles for preparing consolidated financial statements under the FIEL.

Other sources of generally accepted accounting principles or practice includes various documents of accounting and auditing guidance set forth by the Japanese Institute of Certified Public Accountants.
The ASBJ's discussion paper on conceptual framework does not represent an accounting standard.

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