Who Proposes Agenda Topics? — The Division of Roles Between the Accounting Standards Advisory Council and the Accounting Standards Board of Japan

Abstract

The primary focus of this study is to examine what roles ASAC and ASBJ have played when making agenda proposals (i.e., deciding whether to embark on standard-setting). Because this topic has scarcely been discussed to date, the study confines itself to fact finding. With a concrete concern in mind—namely, whether agenda proposals are made primarily by ASAC as a matter of due process under the Due Process Rules—we conducted the investigation.
The analysis showed that, in many cases, ASAC has followed the principled approach of making agenda proposals. At the same time, the number of cases in which ASBJ appears to have made agenda proposals is not negligible. However, a closer examination of cases initiated by ASBJ indicated that the overwhelming majority could be linked to related projects already underway or to its previously published Medium-Term Policies, even though no direct proposal was received from ASAC. In other words, these cases are indirect and, in substance, can largely be regarded as ones for which an agenda proposal was already been made.
In light of these findings, it cannot be concluded that the ASBJ autonomously determined agenda items simply because a case did not go through ASAC. In such cases, mostly, ASBJ appears to have proceeded on the basis of a judgment that substantive consensus had already been reached to the effect that it would commence standard-setting once certain conditions were satisfied—that is, it responded as if it had received a de facto agenda proposal. Accordingly, any attempt to grasp the realities of the respective roles of ASAC and ASBJ in agenda proposals must consider not only which body formally initiated the proposal, but also the context in which the initiation took place.
In addition, this study undertook fact finding motivated by the question of what types of agenda proposals were submitted to ASAC and by which parties. Summarizing the findings in comparison with prior research on agenda setting at the U.S. FASB, we found that—unlike the United States, where the SEC accounted for a large share of agenda proposers—in Japan many agenda proposals came from auditors, whereas proposals from the Financial Services Agency (the Japanese counterpart to the SEC) were scarce. As for the areas in which proposals were made, both Japan and the United States saw many requests relating to accounting for financial instruments, accounting for leases, and accounting for retirement benefits.
Moreover, taking a step back from the Japan–U.S. comparison and surveying the proposed topics more broadly, we also found that, during the period examined, agenda proposals were dominated by requests to clarify interpretations, triggered by situations in which the interpretation of existing accounting standards became unstable or unclear. That said, the present study remains confined to fact finding, and explaining why the observed phenomena occurred—that is, identifying causal relationship—remains a task for future research.