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IFRS Consulting Services

At Pacific Business Consulting, we show how enterprises can adopt IFRS by using Microsoft Dynamics, and also provide IFRS consultation services.

What is IFRS ?

The International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB) and used in more than a hundred countries around the world. IFRS consist of a basic framework, 38 financial standards and 27 interpretations.
In August 2007, the Accounting Standards Board of Japan (ASBJ) and the IASB jointly announced an agreement (“Tokyo Agreement”) to accelerate convergence between Japanese GAAP and IFRS by the end of June 2011. Voluntary IFRS adoption is now allowed in Japan, and in 2012, a decision will be made on whether to impose compulsory adoption of IFRS starting 2015 or 2016. It is expected that compulsory adoption will be imposed.

Official Name International Financial Reporting Standards (IFRS)
Standard-setter International Accounting Standards Board (IASB)
Interpretations Committee International Financial Reporting Interpretations Committee (IFRIC)

Used in more than100 countries

Basic vision of framework

Objective of financial statements
（To provide beneficial information for investors’ decision making.）
Assumptions
（Accrual basis and Going concern）
Quality features of financial statements
（Fitness for purpose, reliability and comparability）
Components of financial statements
（Essences to measure financial position: Assets, Liabilities and Equity）
（Essences to measure operating result: profit and cost）
Recognition for components of financial statements
（Probable that future economic benefit will flow in/out and companies have measurable cost）
Measurement for components of financial statements
（Acquisition cost, Present value and Feasible value）
Concept of capital and capital maintenance
38 standards
IASB (9 items)

IFRS 1　First-time Adoption of International Financial Reporting Standards
・
IFRS 9　Financial instruments: classification and measurement

IASC (29 items）

IAS 1　Presentation of Financial Statements
IAS 2　Inventories
・
・
IAS 41　Agriculture

27 interpretations
IFRIC (16 items）

IFRIC 1　Changes in Existing Decommissioning, Restoration and Similar Liabilities
・
IFRIC19 Extinguishing Financial Liabilities with Equity Instruments

SIC (15 items）

SIC7　Introduction of Euro
SIC10　Government Assistance
・
・
SIC32　Intangible Assets

IASC＝International Accounting Standards Committee
SIC＝Standing Interpretations Committee

Features and benefits of IFRS

The principal objective of IFRS is to create a single set of a global accounting standards that is able to produce more transparent, globally comparable, understandable and acceptable financial reporting for general purpose financial statements. IFRS include the following three features.
IFRS adoption enables investors to make more efficient investment decisions. On the other hand, companies can employ diversified financing methods and enjoy improved research on M&A activities.

Features and benefits of IFRS

Perspectives of IFRS

J-GAAP is rules-based and has detailed numerical criteria to deal with all scenarios.
On the other hand, IFRS are more principles-based. Companies need to decide appropriate account processing based on the principles. 		IFRS put an emphasis on assets and liabilities.
Comprehensive Income is defined as the change in a firm's net assets (assets minus liabilities) from non-owner sources. This is known as the Asset-Liability approach.
On the other hand, J-GAAP is based on revenues-expenses perspectives. Current income is highly valued in business valuation.
１）Principles-based
２）Asset-liability approach

IFRS

３）Fair value
４）Investor’s view

The IFRS state that companies should introduce measurements of assets and liabilities at fair value and balance sheets should report the economic reality of companies. (by consolidating 100% of subsidiaries' income for instance).
J-GAAP values income but measurements would be changed from acquisition cost basis to fair value basis with introduction of the Asset-Liability approach. 		IFRS place a priority on providing useful information for investors by evaluating companies externally.
Due to the principles-based standards, executive managers will have more accountability.
  • Elaboration of cash flow statements
  • Consolidated accounting
  • Comparability
  • International corporate comparisons
  • Consolidation system for both institutions and management
  • Firm performance indicators (Comprehensive income)
  • Detailed notes in addition to normal financial statements

Scope of impact, major processes and implementation approach

The following diagrams depict matrices of examination items for IFRS. In an IFRS adoption project, account processing policies, operation, IT and organization are the main items for consideration.

Scope of the effect, major process and implementation approach

Rather than an institutional point of view, a comprehensive approach to reviewing systems is required.

Companies subject to IFRS

IFRS do not apply all companies. They are basically the standards for listed companies. In order to adopt IFRS, companies need to organize internals system to control the standards.
In Japan, IFRS will be applied only to consolidated financial statements, and individual financial statements should be prepared with J-GAAP. However, enterprises which do not prepare consolidated financial statements will have to disclose IFRS individual financial statements.

IFRS target companies

  • Listed enterprises: enterprises whose stocks are listed on the stock market.
  • Large enterprises: companies with capital of 500 million yen or total liabilities of 20 billion yen.
  • According to the Guidelines on the Accounting of Small and Medium Enterprises, the following companies are exempt from IFRS adoption.
    • Subsidiaries and related companies of enterprises to whom the Financial Instruments and Exchange Act applies.
    • Companies with accounting auditors and their subsidiaries.
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