On August 4, 2007, Nikkei Newspaper reported that the Accounting Standards Board of Japan (ASBJ) and the International Accounting Standards Board (IASB) agreed, in major respects, that the ASBJ will work on eliminating all of the existing differences between Japanese GAAP and IFRS by 2011. Nikkei says that the agreement would be announced next week.
More specifically, one of the major differences between two standards is accounting for business combinations. Japanese GAAP requires entities that either the purchase method or the pooling-of-interest method be applied depending on the economic substance of such transactions. If a business combination is judged as “uniting of interest” as a result of applying the specific criteria, the pooling-of-interest method should be applied; otherwise, the transaction is deemed as “acquisition of other entity,” to which the purchase method should be applied. Moreover, any goodwill recognized as a result of applying the purchase method should be amortized over no more than 20 years.
Nikkei reported that the ASBJ is expected to eliminate the pooling-of-interest method from the alternatives, and prohibit amortization of goodwill, as required by IFRS and U.S. GAAP.