Panel urges firms to switch to consolidated statements

Japanese businesses should shift to using consolidated rather than individual financial statements from the business year starting in April 1999 since it is rapidly becoming the global norm, an advisory panel said in a report released June 6.

The Business Accounting Council, an advisory body to the finance minister, says in its report that the increasing diversity and internationalization of companies is making it more difficult to make a sound investment decision on individual earnings reports. The report outlines the accounting details required to make the shift, but says that further debate is needed on such issues as the items that should be disclosed by holding companies, which will be allowed to form as early as January 1998.

The council also called for a review of the current definitions of subsidiaries, saying that a firm could be classified as a subsidiary if its decision-making organs are influenced by another firm, such as through a majority on its executive board. On the same day, the council also drew up an interim report on setting accounting standards for financial such products as derivatives, which call for the introduction of calculations made at market, rather than book, value.