ABSTRACT
Japan has moved relatively cautiously towards application of International Financial Reporting Standards (IFRS Standards). Consideration of the unique institutional background and culture largely explains the caution. The distinctive structure of businesses means that accounting practices developed in very different economies may appear to constrain business activity. There is a strong stock market which is increasingly replacing bank finance as the source of funds for business expansion. The accounting profession is relatively small and does not have a direct role in setting accounting standards. Accounting and auditing standards, and corporate governance codes, are developed under the control of government departments. From a historical tradition of secrecy in accounting, Japan has moved to increasing transparency and in particular has encouraged integrated reporting. IFRS Standards have taken over from US GAAP (generally accepted accounting principles) as the main accounting system for Japanese companies reporting globally. Well-publicised cases of fraud have led to a need for continuing reform of corporate governance and auditing standards. The unique Japanese context provides opportunities for research in many directions.
