Accounting in Japan

1. The accounting standards

Japanese accounting standards ('Japanese GAAP') are developed by the Accounting

Standards Board of Japan (ASBJ), which was established in 2001. Under an agreement reached in August
2007 between the ASBJ and the International Accounting Standards Board (IASB), known as
Under the Tokyo Agreement, the ASBJ has worked to align the requirements of the standards.
Japanese accountants with international financial reporting standards (IFRS). The
national and foreign companies can choose one of the four information frameworks
recognized financial standards: IFRS standards, Japanese accounting standards (Japanese GAAP)
the modified international standards of Japan (JMIS) (modified version of IFRS standards) and
US GAAP standards. SMEs generally use Japanese GAP as a framework.
financial information.

- The IFRS (International Financial Reporting Standards) Since 2010, the

companies that meet certain criteria are allowed to voluntarily apply the
IFRS standards for their consolidated financial statements in Japan. In 2013, the FSA
The Financial Services Agency revised its orders regarding the Cabinet and
removed certain requirements to strengthen the application of IFRS standards
Japan. As a result, the number of companies eligible for the application of the standards.
IFRS has been increased and virtually all publicly traded companies and
Non-listed companies are allowed to use IFRS standards for financial statements.
consolidated.

- Japanese accounting standards (Japanese GAAP): Accounting standards are

developed by the Accounting Standards Board of Japan (ASBJ)
Standards Board of Japan) and are referred to as Japanese accounting standards
by the Financial Services Agency of Japan. In Japan, companies listed on
standards can currently choose to file their consolidated financial statements.
Japanese GAAP is part of the 'high-quality accounting standards recognized.
internationally" mentioned in the G8 declaration in June 2003.

- The modified international standards of Japan (JMIS): it is a version

modified IFRS with deletions or additions as defined by the
 Japanese standardizer. There are two modification standards by the ASBJ, concerning
the accounting of goodwill and other elements of comprehensive income. The JMIS have
were initially published in June 2015 following the initial approval of the IFRS
covering the IFRS standards published by the IASB no later than December 31, 2012.

- US GAAP standards: allowing companies to provide financial reporting of

their activities according to the current standards in the United States for publicly traded companies

Japan can currently choose to use to submit their financial statements

consolidated. The application of these standards is subject to the authorization of the
Commission of the Financial Services Agency.

- The Japanese GAP: it is used by SMEs as a framework for financial information.

2. Financial Statements
balance,
income statement
cash flow statement
the state of the evolution of net assets,
the related annexes.

Japanese companies are required to present two sets of financial statements: the
consolidated financial statements and individual financial statements for parent companies
only. And are established, in principle, in accordance with accounting principles
generally accepted in Japan (J GAAP) as published by the ASBJ. For the
consolidated financial statements of listed companies, the use of IFRS standards of
modified international standards of Japan (JMIS) and US GAAP is also
authorized. JMIS is the new set of accounting standards inaugurated by the ASBJ in
2015 and developed based on the accounting standards approval process and
interpretations published by the International Accounting Standards Board (IASB).
With the introduction of the JMIS, there are four accounting frameworks that companies
quoted in Japan can use, but the voluntary application of IFRS standards is in
constant expansion.
A Japanese company selects its fiscal year at the beginning of its activities in
Japan - the tax year can be the calendar year or another period
 not exceeding 12 months. A branch must generally adopt the same
fiscal year used by its head office.
The Commercial Code outlines the requirements for the preparation of a report.
annual and an annex by limited liability companies (Kabushiki Kaisha). The
The annual report must be submitted to the General Meeting of Shareholders and include
balance sheet and the income statement.

Only publicly traded companies must publish their accounts. According to the law of
transferable titles and the law of exchanges, registered companies must file
annual and biannual reports to the Ministry of Finance, as well as a copy
of the foreign exchange market where transferable securities are listed.
companies are required to engage an auditor to
conduct an annual audit of the financial health of their organization.
Companies with a share capital exceeding 500 million JPY or the
liabilities are equal to or greater than 20 billion JPY are required to appoint a
external auditor (a public accountant) or an auditing firm and must
to be subject to an audit based on corporate law, as a company must.
listed on the Japanese stock markets.
3. Accounting bodies
BAC: Council of Commercial Accounting
ASBJ: Japanese Accounting Standards Board (English site)
JICPA: Japanese Institute of Certified Public Accountants
FASF: The foundation of financial accounting standards

In conclusion, we find that most of the rules in Japanese accounting are upheld.
In laws, ministerial decrees or orders, it can be inferred that it has a direction.
Legal. The main accounting tools all have legal statuses like the code
of commerce, these laws along with the "Commercial Accounting Principles" form the basis
regulatory of Japanese accounting.

Accounting in China
 1. Accounting standards
The Chinese accounting system is primarily based on the Chinese Accounting Standards.
(CAS), which are perceived as direct competitors to the IFRS international standards.
Promulgated by the Ministry of Finance (MOF) have been in effect since July 1st.
1993.
All companies incorporated in China, including foreign-funded companies, must
prepare financial statements in compliance with Chinese accounting standards
Accounting Standards » « CAS »), to fulfill their accounting and tax obligations. In
virtue of CAS standards,
The Chinese fiscal year starts on January 1 and ends on December 31 of the same year.
year.
Chinese companies are required to publish their financial statements annually, in a
audit report containing a paragraph 'task' and a paragraph of opinion, which serves to
establish whether the accounts have been prepared in accordance with the laws in force.

All companies must follow the same configuration regarding the plan.
accounting, but they have the freedom to create sub-accounts according to their needs
specific commercial
Companies in China must prepare invoices, books of accounts, and reports.
financiers in Chinese for all their local statutory declarations
The currency for accounting must be RMB and not foreign currencies. However,
the company can make a conversion for its financial report and choose a rate of
conversion
The accounting documents must be filed with the supporting documents. This means the
Receipts and associated bank slips must be attached to the accounting documents.
and at the end of the month, these receipts must be attached together according to the receipt serial number

in chronological order, and this order cannot be modified afterwards.

the difference between companies that sell goods and those that sell services, because
There is no VAT on services that are subject to turnover tax.
tax).

2. Financial statements
The financial account statements must include a balance sheet,
profits and losses,
 a report on gross self-financing margin,
notes regarding the accounts,
an appropriation account of profits and losses. For more information
precise,

These financial statements must be prepared in accordance with Chinese accounting standards.
("Chinese Accounting Standards"), kept for at least 15 years, and used for the
calculation of Corporate Income Tax ("Enterprise Income Tax" or "EIT") and
distributable profits.

Every commercial transaction conducted in China must be documented with a written invoice.
in Chinese and addressed with the official seals of the supplier ('Fapiao'). A Fapiao is not
only a simple official document, it is also a tax note, allowing for the
Chinese government is collecting certain taxes. A significant proportion of small and
Chinese medium-sized enterprises carry out 'under-the-table' sales operations and prefer
avoid the issuance of Fapiaos, in order to reduce their taxation. It is not recommended to
proceed this way. Furthermore, to recover the VAT paid upstream, it is essential to
provide the corresponding Fapiaos.
The annual financial statements must be audited and certified by a Chinese accountant.
independent. This audit aims to ensure that companies effectively use the
CAS. Furthermore, this audit helps prepare the tax reconciliation for the Income Tax on
Enterprise Income Tax Reconciliation. Due to
divergences between accounting and tax standards, the actual amount of EIT is often
different from that recorded in the financial statements. That is why, within the 5 months following
At the end of a fiscal year, the company must provide reconciled statements to the administration.
Chinese tax authorities. The latter will then determine whether the amount of EIT paid by the company
must be adjusted.

Balance

The presentation of the balance sheet resembles that of an American balance sheet. The assets are classified according to the

principle of decreasing liquidity, it starts with cash and ends with the 'non-
"values" such as establishment fees. Liabilities are classified according to the principle of maturity
decreasing, it begins with current banking competitions and ends with capital
clean.
The methods of valuing inventory and depreciation faithfully follow the model
American: LIFO, FIFO, CUMP, inventory identification, linear and declining with some
residual values (10% of original value).

The income statements

Chinese accounting is a destination-based accounting, in which items are not classified.
depending on the nature of the charges, as in the French, but based on their
destination (what the amount was used for). There are four main categories of charges:
production costs (cost of goods sold), distribution expenses, management expenses
and financial charges.
3. The accounting bodies:

CASC, Chinese Accounting Standards Committee

Ministry of Finance

CICPA, Chinese Institute of Certified Public Accountants

In conclusion, Chinese accounting is characterized by an American influence.

the focus on management spirit and the private interests of shareholders. However, the interests of
the state remains dominant, a taxation that is out of sync with accounting rules results in
the existence of fiscal accounting (depreciation adjustments, deferred taxes) This plan
remains a plan made by the State for the service of the State.