An advisory body to the finance minister on Feb. 7 proposed changing the nation’s corporate accounting standards to place greater weight on consolidated statements to better match global standards.

The Business Accounting Council said in a draft report that the change is needed in view of the increasing global activity and diversification of Japanese firms, and said the new standards would be phased in gradually from the business year that ends March 1999. A final report on the issue is expected this summer, after the public is asked to submit its views by March 25.

Specifically, the council suggested preparing financial reports so that consolidated figures come before the individual company’s. It also suggested simplifying the data required from individual firms.

Information regarding off-balance items and risk should be disclosed on a consolidated basis, and cash-flow statements and interim consolidated statements should be introduced and available for audit, it said. In line with such revisions, the scope of firms considered to be affiliates and associated companies needs to be redrawn, the panel added.

At present, firms are considered affiliates when one company possesses a majority of their shares, but at the international level, real domination — such as whether employees from one firm continually form the majority of a company’s executive board — is a determining factor, panel head Tetsuya Morita said.

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