http://blog.e-bdo.com/intranet/global/jnblog1.nsf/en-gbTue, 23 Feb 2010 17:54:55 +0100 Tue, 23 Feb 2010 17:54:55 +0100 Jeremy Newman We launched the ‘BDO film’ .....
Jeremy]]>
Jeremy]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/We-launched-the-BDO-film?opendocument&comments#23022010175455NTSNZV.htm Mon, 22 Feb 2010 16:05:02 +0100 Andrew Tran We launched the ‘BDO film’ ..... http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/We-launched-the-BDO-film?opendocument&comments#22022010160502NTSLV7.htm Sun, 21 Feb 2010 22:06:31 +0100 Jeremy Newman A missed opportunity
However, from the perspective of Japanese companies with only domestic business, it is worth noting that the Financial Services Authority has said that they will look at the extent to which IFRS is suitable for adoption in Japan before coming to a final decision in 2012. Mr Masamichi Kono, Deputy Director General of the Supervisory Bureau of the Financial Services Agency of Japan, spoke about the approach being taken in Japan at a conference hosted by the European Commission on 8 February. He explained the Japanese step-by-step roadmap toward the full adoption of IFRS by 2015 or 2016, including the voluntary early adoption that has already started from 1 April 2009, and noted that before a final decision was taken on the adoption of IFRS, consideration would be given to:

Whether IFRSs appropriately reflect business practices in Japan;

Whether Japanese accounting stakeholders express opinions to the IASB proactively and effectively;

Whether IFRSs are appropriately and promptly translated into Japanese; and

Whether education and training on IFRSs are sufficiently conducted

While this may give some reassurance for Japanese listed companies that have only domestic business that their concerns will be taken into account, there are also wider issues. The global move to IFRS means that investors and providers of finance are looking towards having a uniform financial reporting framework. In jurisdictions which have already moved to IFRS, we have already seen lenders asking companies which still report in accordance with local GAAP to provide IFRS numbers.

Even if a company has only domestic business, I believe that there are benefits of adopting IFRS and that ultimately there will be penalties for not doing so as the globalisation of markets becomes even more pronounced. Listed companies, which depend on the markets for funding and investment (whether through the issue of shares or debt), will need to adopt a single global accounting framework in order to secure competitively priced arrangements, whether through lenders, or the issue of debt or share capital. That is a clear advantage that I think makes the costs of conversion to IFRS well worth paying.]]>
However, from the perspective of Japanese companies with only domestic business, it is worth noting that the Financial Services Authority has said that they will look at the extent to which IFRS is suitable for adoption in Japan before coming to a final decision in 2012. Mr Masamichi Kono, Deputy Director General of the Supervisory Bureau of the Financial Services Agency of Japan, spoke about the approach being taken in Japan at a conference hosted by the European Commission on 8 February. He explained the Japanese step-by-step roadmap toward the full adoption of IFRS by 2015 or 2016, including the voluntary early adoption that has already started from 1 April 2009, and noted that before a final decision was taken on the adoption of IFRS, consideration would be given to:

Whether IFRSs appropriately reflect business practices in Japan;

Whether Japanese accounting stakeholders express opinions to the IASB proactively and effectively;

Whether IFRSs are appropriately and promptly translated into Japanese; and

Whether education and training on IFRSs are sufficiently conducted

While this may give some reassurance for Japanese listed companies that have only domestic business that their concerns will be taken into account, there are also wider issues. The global move to IFRS means that investors and providers of finance are looking towards having a uniform financial reporting framework. In jurisdictions which have already moved to IFRS, we have already seen lenders asking companies which still report in accordance with local GAAP to provide IFRS numbers.

Even if a company has only domestic business, I believe that there are benefits of adopting IFRS and that ultimately there will be penalties for not doing so as the globalisation of markets becomes even more pronounced. Listed companies, which depend on the markets for funding and investment (whether through the issue of shares or debt), will need to adopt a single global accounting framework in order to secure competitively priced arrangements, whether through lenders, or the issue of debt or share capital. That is a clear advantage that I think makes the costs of conversion to IFRS well worth paying.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/A-missed-opportunity?opendocument&comments#21022010220631NTSTX5.htm Thu, 18 Feb 2010 07:47:38 +0100 Hiroshi Nagayama A missed opportunity http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/A-missed-opportunity?opendocument&comments#18022010074738NTSB6B.htm Fri, 12 Feb 2010 09:48:07 +0100 Hiroshi Nagayama We launched the ‘BDO film’ .....
It would definitely increase recognition of BDO.]]>
It would definitely increase recognition of BDO.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/We-launched-the-BDO-film?opendocument&comments#12022010094807NTSDHM.htm Wed, 10 Feb 2010 06:39:32 +0100 Hiroshi Nagayama One of the most significant challenges we face in Japan....
I am Hiroshi Nagayama from BDO Japan (BDO Consulting).

I apologize that it took long time to comment on your blog.

I agree that the overwhelming market share by Big 4 is not any good for clients. Actually, many of my clients have trouble with the highly concentrated market.

BDO Japan have to strive more to increase market share.]]>
I am Hiroshi Nagayama from BDO Japan (BDO Consulting).

I apologize that it took long time to comment on your blog.

I agree that the overwhelming market share by Big 4 is not any good for clients. Actually, many of my clients have trouble with the highly concentrated market.

BDO Japan have to strive more to increase market share.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/One-of-the-most-significant-challenges-we-face-in-Japan?opendocument&comments#10022010063932NTS9TR.htm Mon, 8 Feb 2010 20:20:13 +0100 Jeremy Newman The new year... http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/The-new-year?opendocument&comments#08022010202013NTSRUP.htm Mon, 8 Feb 2010 09:10:15 +0100 Elizabeth Solaru The new year...
The full article can be found at { Link }

Recent research from ACCA points to:

‘…a growing global expectation that accountants will fill relatively complex roles…reflect[ing] the challenges facing today’s organisations – particularly the need for risk management and for forward-looking analysis…[and acknowledging] the increasing importance of the accountant as strategic adviser to business, a role that is becoming even more critical during the current tough economic times’.]]>
The full article can be found at { Link }

Recent research from ACCA points to:

‘…a growing global expectation that accountants will fill relatively complex roles…reflect[ing] the challenges facing today’s organisations – particularly the need for risk management and for forward-looking analysis…[and acknowledging] the increasing importance of the accountant as strategic adviser to business, a role that is becoming even more critical during the current tough economic times’.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/The-new-year?opendocument&comments#08022010091015NTSCRY.htm Tue, 26 Jan 2010 07:35:41 +0100 Jagadish Bhattarai One of the most significant challenges we face in Japan....
There should be two pronged approach to bridge the ever enlarging gap between Big 4 and others. First, firms other than Big 4 should gear up to improve their standards, services, network and expertise to match up with Big 4. Second, the market should leave their bias (positive) with Big 4 and venture out to other firms. This second option is only possible if the clients initiate to do away with explicit or implicit ‘Big 4 only’ mindset. The problems for others firms is that there is no ‘level playing field’ in the profession and ‘Big 4’ have both muscle and clients’ bias in their favour. If ‘Big 5’ can come down to ‘Big 4’ there is every possibility of lessening the ‘Big’ number. However there should be no protection of any sort to the giant firms in the name ‘too big to fail’. Obviously asking Big 4 to sell off their resources is not a logical alternative.]]>
There should be two pronged approach to bridge the ever enlarging gap between Big 4 and others. First, firms other than Big 4 should gear up to improve their standards, services, network and expertise to match up with Big 4. Second, the market should leave their bias (positive) with Big 4 and venture out to other firms. This second option is only possible if the clients initiate to do away with explicit or implicit ‘Big 4 only’ mindset. The problems for others firms is that there is no ‘level playing field’ in the profession and ‘Big 4’ have both muscle and clients’ bias in their favour. If ‘Big 5’ can come down to ‘Big 4’ there is every possibility of lessening the ‘Big’ number. However there should be no protection of any sort to the giant firms in the name ‘too big to fail’. Obviously asking Big 4 to sell off their resources is not a logical alternative.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/One-of-the-most-significant-challenges-we-face-in-Japan?opendocument&comments#26012010073541NTSAWU.htm Wed, 6 Jan 2010 13:34:54 +0100 I continue to be surprised....
It was interesting to see another example this month. The retiring chairman of the International Public Sector Accounting Standards Board (IPSASB) wrote in a magazine that one of the biggest challenges for the profession - still to be achieved - is to have a standard on accounting for public liabilities such as health care and pension costs. Governments do not consider social obligations to be accounting liabilities, because there is no need to continue providing them in the future - anyway accounting for off balance sheet liabilities would be ruinous for the public accounts. Echoes of 'mark to market'?

Yesterday the FT reported the US faces a public pensions shortfall of $2,000bn.]]>
It was interesting to see another example this month. The retiring chairman of the International Public Sector Accounting Standards Board (IPSASB) wrote in a magazine that one of the biggest challenges for the profession - still to be achieved - is to have a standard on accounting for public liabilities such as health care and pension costs. Governments do not consider social obligations to be accounting liabilities, because there is no need to continue providing them in the future - anyway accounting for off balance sheet liabilities would be ruinous for the public accounts. Echoes of 'mark to market'?

Yesterday the FT reported the US faces a public pensions shortfall of $2,000bn.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/I-continue-to-be-surprised?opendocument&comments#06012010133454NTSHXD.htm Sun, 29 Nov 2009 10:36:50 +0100 IJ ‘Big 4 only’ Clauses
Allowing auditees to shop around for such services encourages a race to the bottom in the audit profession.

In fact regulatory capture was a major concern of the Warwick Commission, who reported a couple of days ago on international financial reform.

The problem seems especially bad in the UK where the recent financial collapse cost each person a world record of $50,000; the cost in the US was $10,000 per person. { Link }

There's little political will at present to protect taxpayers - so what next?]]>
Allowing auditees to shop around for such services encourages a race to the bottom in the audit profession.

In fact regulatory capture was a major concern of the Warwick Commission, who reported a couple of days ago on international financial reform.

The problem seems especially bad in the UK where the recent financial collapse cost each person a world record of $50,000; the cost in the US was $10,000 per person. { Link }

There's little political will at present to protect taxpayers - so what next?]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/Big-4-only-Clauses?opendocument&comments#29112009103650NTSEG3.htm Fri, 27 Nov 2009 09:17:07 +0100 Jagadish Bhattarai ‘Big 4 only’ Clauses http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/Big-4-only-Clauses?opendocument&comments#27112009091707NTSCW9.htm Wed, 25 Nov 2009 08:13:00 +0100 Jeremy Newman Another view on Fair Value
The incurred loss model has been criticised, in particular following the credit crisis. These criticisms include that the interest rate charged on a loan includes a premium that takes into account losses that are expected to occur, losses are not recorded until a trigger event happens regardless of how likely it is on inception that those losses will actually arise, and it is not always clear when a loss has been incurred.

Because of this, both the IASB and Basel are looking at an expected loss model. The IASB’s proposed approach is that only losses expected on loans which exist should be taken into account (this is in contrast with a ‘through the economic cycle’ expected loss model which would also record a provision for loans which have not yet been advanced). Basel seem to be taking the same approach as the IASB – I say seem to be, as a document they issued in August 2009 Guiding principles for the replacement of IAS 39 makes reference to a model which reflects ‘estimated losses on a loan portfolio over the life of the loans and considering the loss experience over the complete economic cycle’. What is clear is that the IASB and Basel are moving in the same direction, but whether Basel will require some form of provisioning over and above the amount calculated under the final IASB guidance isn’t certain.]]>
The incurred loss model has been criticised, in particular following the credit crisis. These criticisms include that the interest rate charged on a loan includes a premium that takes into account losses that are expected to occur, losses are not recorded until a trigger event happens regardless of how likely it is on inception that those losses will actually arise, and it is not always clear when a loss has been incurred.

Because of this, both the IASB and Basel are looking at an expected loss model. The IASB’s proposed approach is that only losses expected on loans which exist should be taken into account (this is in contrast with a ‘through the economic cycle’ expected loss model which would also record a provision for loans which have not yet been advanced). Basel seem to be taking the same approach as the IASB – I say seem to be, as a document they issued in August 2009 Guiding principles for the replacement of IAS 39 makes reference to a model which reflects ‘estimated losses on a loan portfolio over the life of the loans and considering the loss experience over the complete economic cycle’. What is clear is that the IASB and Basel are moving in the same direction, but whether Basel will require some form of provisioning over and above the amount calculated under the final IASB guidance isn’t certain.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/Another-view-on-Fair-Value?opendocument&comments#25112009081300NTSBN7.htm Tue, 24 Nov 2009 02:24:51 +0100 Andrew Another view on Fair Value
I enjoy reading your blog - thanks for taking the time to write it.

I'd be interested in reading your thoughts on the differences between IFRS and Basel when determining loss provisions. I understand IFRS is based on "incurred loss" and Basel is on "estimated loss" uie. includes future losses - but do the two different principles utilise the same "trigger" events ?]]>
I enjoy reading your blog - thanks for taking the time to write it.

I'd be interested in reading your thoughts on the differences between IFRS and Basel when determining loss provisions. I understand IFRS is based on "incurred loss" and Basel is on "estimated loss" uie. includes future losses - but do the two different principles utilise the same "trigger" events ?]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/Another-view-on-Fair-Value?opendocument&comments#24112009022451NTS4UL.htm Mon, 23 Nov 2009 06:16:37 +0100 Jagadish Bhattarai Another view on Fair Value http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/Another-view-on-Fair-Value?opendocument&comments#23112009061637NTS9DF.htm Wed, 18 Nov 2009 16:35:55 +0100 Elizabeth Solaru IFRS - What now? http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/IFRS-what-now?opendocument&comments#18112009163555NTSMGH.htm Sat, 14 Nov 2009 18:39:57 +0100 Jeremy Newman What is the role of accounting standards? http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/What-is-the-role-of-accounting-standards?opendocument&comments#14112009183957NTSPW2.htm Sat, 14 Nov 2009 12:42:51 +0100 IJ What is the role of accounting standards?
A little progress is being made, but at glacial speed. The EU wants to protect audit in its international area; but much opposition can be expected from political and business groupings - especially financial institutions that received light touch regulation in a few countries, billions of treasury support and no doubt the hope of more.]]>
A little progress is being made, but at glacial speed. The EU wants to protect audit in its international area; but much opposition can be expected from political and business groupings - especially financial institutions that received light touch regulation in a few countries, billions of treasury support and no doubt the hope of more.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/What-is-the-role-of-accounting-standards?opendocument&comments#14112009124251NTSGWU.htm Fri, 13 Nov 2009 11:32:19 +0100 Chris Dreyer What is the role of accounting standards? http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/What-is-the-role-of-accounting-standards?opendocument&comments#13112009113219NTSFJR.htm Fri, 23 Oct 2009 08:45:06 +0100 IJ How many firms do you need to create a competitive market?
In this connection it was revealing that the world's most powerful government is now conceding it can do little to protect the public interest. What hope the G20, in St Andrews next month.]]>
In this connection it was revealing that the world's most powerful government is now conceding it can do little to protect the public interest. What hope the G20, in St Andrews next month.]]> http://blog.e-bdo.com/intranet/global/jnblog1.nsf/dx/How-many-firms-do-you-need-to-create-a-competitive-market-sept-2009?opendocument&comments#23102009084506NTSB4R.htm