Business Accounting in Japan (Research Paper Sample)

An Overview of Japan and Its Business Accounting Practices Name: Course: Lecturer: Date: Table of Contents  TOC \o "1-3" \h \z \u  HYPERLINK \l "_Toc371188572"
A Brief Overview of Japan  PAGEREF _Toc371188572 \h
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Facts about the Japanese Yen  PAGEREF _Toc371188573 \h
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Recent activity of the Japanese yen  PAGEREF _Toc371188574 \h
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Cultural Influences on Accounting Practices in Japan  PAGEREF _Toc371188575 \h
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Variations in Accounting Standards and Measurements from U.S. GAAP  PAGEREF _Toc371188576 \h
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Infrastructure Development and the Economy  PAGEREF _Toc371188577 \h
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The Political Climate of Japan and Its Relation to Accounting Practice and the Economy  PAGEREF _Toc371188578 \h
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Status of Auditing in Japan  PAGEREF _Toc371188579 \h
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Recent Accounting Frauds in Japan  PAGEREF _Toc371188580 \h
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ChuoAoyama  PAGEREF _Toc371188581 \h
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Nikko Cordial  PAGEREF _Toc371188582 \h
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Role of Cost/Management Accounting in Japan  PAGEREF _Toc371188583 \h
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References  PAGEREF _Toc371188584 \h
15  A Brief Overview of Japan Japan is an Island country and it encompasses over 6000 islands. It is located in the Asian continent. The majority of the Japan’s land lies within the four largest islands. The country was unified into a strong state in the 8th century under the leadership of an emperor (Lambert, 2012). The capital of Japan was moved in 794 to what today is referred to as Kyoto. It is at this time that Japan’s Heian period began, a time when much of the culture distinct to Japan today emerged including poetry, art, music and literature. During the 10th and 11th centuries, Japan was in a feudal era, during which a ruling class of warriors known as Samurai came into power. The Shogun was the leader of the most powerful of the clans. The year 1467 was not a good year for Japan as a civil war known as Onin war broke out and was between the feudal warlords and the Shogun known as daimyo (Lambert, 2012). The war lasted for close to a 100 years after which the country got unified again in the year 1590 under the leadership of Toyotomi Hideyoshi. The Portuguese arrived in Japan in the 1500s and this made Japan begin trade and learn about the west and the European society. In 1639, the country was closed to outside contact and trade by the Shogun through a policy then known as sakoku. This policy left Japan closed to foreigners for a period not less than 200 years (Lambert, 2012). However, United States’ Commodore Mathew Perry compelled Japan to reopen its relations with the rest of the world. The country later became an empire under the rule of an emperor. During World War II, Japan was an ally of the Axis Powers which included Italy and Germany. On December 7 1941, the United States was attacked by Japan through the bombing of Hawaii’s Pearl Harbor. The United States then entered the war on the Allies side. The United States in 1945 dropped atomic bombs on the cities of Nagasaki and Hiroshima forcing Japan to surrender. Japan later in 1947 adopted a constitution and a democratic government style (Lambert, 2012). Japan has since then grown immensely to become one of the most powerful nations in the world especially in terms of the economy. Currently, Japan whose capital is Tokyo has a population of about 127,368, 088 and is 377,835 square kilometers big (Lambert, 2012). With a constitutional monarchy based on a parliamentary government, Japan’s economy is largely influenced by a variety of world’s largest industries involved in manufacturing of motor vehicles, machine tools, ships, chemicals, electronic equipment, textiles, steel and non-ferrous metals and processed foods (Fukao, 2003). It also produces agricultural commodities like rice, dairy products sugar beets among others. Japan has a negligible amount of mineral resources, its major exports are motor vehicles, chemicals, transport equipment, electric and electronic machines and semiconductors. In relation to imports, the country majorly imports textiles, raw materials, fuels, food stuffs, chemicals, equipment and machinery. The currency in use is the Japanese yen (JPY) and the country has a national GDP of about $4,444,000,000,000. Facts about the Japanese Yen The official currency of Japan is known as the Yen. It is usually known as the Japanese yen with the symbol ¥ being used as the official symbol and JPY as the official ISO code (Onlineforex.net, 2013). The currency comes third after the United States Dollar and Euro in terms of being the most traded currency across the world. Yen accounts for close to 17% of the total foreign exchange trading. In the currency market, Japanese yen constitutes a part of the most traded currency pair: USD/JPY, just after EUR/USD. This pair accounts for about 13% of the total online forex trading (Shyam & Yamaji, 1999). The Meiji government was the one that originally introduced the Japanese Yen in 1871. At the time, it was introduced to replace the earlier, rather complex monetary system based on Mon (Onlineforex.net, 2013). Yen was then legally defined as 1.5 grams of pure gold and 24.26 grams (0.78 troy ounce) of pure silver. Currently, that same amount of silver is worth about 1181 of modern yen and the same weight of gold is worth about 4715 yen. The value of Japanese yen declined drastically during and after World War II. Following a given period of uncertainty, the value was fixed at ¥360 per 1$ U.S (Onlineforex.net, 2013). Yen was part of the Bretton Woods system, a move aimed at stabilizing prices in the Japanese economy. Yen went through yet another crisis (second major currency crisis) in 1971. At this point in time, the yen was already undervalued. The effect of yen’s crisis was such that Japanese exports cost very little in the global markets while imports became quite expensive. However, a solution, the establishment of a fixed exchange rate against the U.S. dollar was enforced for three years until such a time when almost all major nations opted for a floating exchange rate. In the 80s, Japans was still struggling with a weak currency attracting low interest rates within the country. A flow of capital to nations where high interest rates were being enjoyed was prevalent. The Bank of Japan maintains the stability of the yen through: control of the market infrastructure and payment systems; sustaining price stability; and maintaining financial stability (Shyam & Yamaji, 1999). Recent activity of the Japanese yen Despite the yen having been relatively weak for several years, the currency in 2009-10 particularly showed great performance reaching a relatively high record against the USD and Euro. Today the yen has gained strongly against the USD and Euro and has become very expensive, a level rarely witnessed in yen’s history (Fukao, 2003). This is evident in the case of goods such as cameras and cars made in Japan which currently cost an amount high, seldom witnessed for Americans and Europeans. The Japanese asset price bubble saw the yen decline in value against the dollar. Year 2008’s global economic crisis saw the decline trend reverse with almost every other currency other than the Swiss franc declining against the yen. In a very recent occurrence (2013), the Bank of Japan declined to modify her domestic monetary policy as had been moderately expected (Fukao, 2003). This decision according to the governor of the central bank was influenced by the fact that government bond markets witnessed less volatility than before. As such, this saw the yen gain in value against the dollar, with the dollar decreasing by 1.78% as compared to JPY during the American trading session. Cultural Influences on Accounting Practices in Japan According to Hofstede (cited in Chan, Lin & Lai Lan Mo, 2003)) culture refers to the collective programming of the mind that distinguishes members of one group or society from those of another. Culture is often passed along through written rules, generations or nationality from generation to generation. Culture has a great impact on values, interactions and norms across and within social systems. Culture forms one’s worldview, the approach in which one considers all things in life as being true or false, right or wrong and ugly or beautiful. Culture is a product of personal actions and internal thought, it is usually crystallized in the tangible products of the society and institutions alike. Accounting practices in Japan such as preparation of financial statement disclosures, detection of misstatements and other accounting practices employ similar or identical standards. Further, the influence of the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) is evident (Chan, Lin & Lai Lan Mo, 2003). However, the cultural dimensions of the location or country where accounting practices are done results into multiple differences between accounting practices. Japan’s accounting standards are based on its accounting practices which are the implied accounting rules as conducted in the context of Japanese culture. In Japan the implied accounting rules are developed uniquely since the manner in which business relationships evolve across the different cultures in Japan is unique as well. Business relationships in Japan are different from those in other parts of the world since the culture within which they are formed is unique. Given that accounting standards are based on accounting practices and that the accounting practices ar...