A Comparison of Corporate Financial Reporting in Japan and the United States

By Hiroyuki ItamiKunio Itoh
1982| Working Paper No. 671

This is a research on how corporate financial reporting practices are influenced by such environmental (to accounting) factors as the capital market institutions, the legal system and management behavior. International comparison provides an appropriate setting. First, actual accounting practices are concisely compared between Japan and the US in terms of the accounting standard setting processes and the contents of the set standards. These observed differences are further summarized into four dimensions: (1) private vs public sector standard setting, (2) details of set standards, (3) the concept of earnings to be measured and (4) recognition criterion of assets and liabilities. From this, it is argued that the role of financial accounting has somewhat different orientation in two countries. Then, the paper asks “why these differences?” After identifying six variables among the environmental factors as the major determinants of accounting practices, the paper offers an explanation of how the differences in these six variables can create different accounting practices in two countries.