J-GAAP: Tangible Fixed Assets

Property, plant, and equipment should be measured at cost less accumulated depreciation in both Japanese GAAP and international accounting standards.

The original cost of the asset is determined in an essentially similar way, but accounting for closure and removal costs is different from each other. IAS 16 (revised 1998), Property, Plant and Equipment, requires that a liability that results in future cash flows for closure and removal activities should be recognized, and that accrued costs must be added to the original cost. In Japan, such future closure and removal cash flows is generally deducted from the salvage value of the asset or is recognized as a provision for closure and removal on an accrual base, which would result in allocating the cost over the useful life of the asset.

Major difference would be found in practice of revaluation, which is an allowed alternative by IAS 16. In Japan, GAAP does not allow revaluation, but Land Revaluation Law, which was enacted originally in 1998, gave large companies, as defined in the Commercial Code, and financial institutions a chance of one-time optional revaluation of land for operating purposes for fiscal years ending March 1998-March 2002.

IAS 40 (2002), Investment Property, requires an entity to select either of the cost model or the fair value model on subsequent measurement of investment properties. If the cost model is selected, fair value information about investment properties must be disclosed in the accompanying footnote to the financial statements. Japanese GAAP neither set forth a definition of investment properties for measurement purpose (but require presentation as a separate line item on the balance sheet), nor require fair value disclosure about investment properties. The BADC’s Accounting Standards for Impairment of Long-Lived Assets, which was issued in August 2002, revisited the issue and stated that the BADC decided not to require fair value information for investment properties.