Reviewed by Robert Bloom John Carroll University
An anthology of essays on Japanese accounting since World War II written by Kyojiro Someya, a retired professor, this book deals with the history of accounting in Japan. Outside of Japan, not much is known about academic studies in accounting in that country since such research is usually published in Japanese. In the preface, the author contends that the application of this research served to enhance economic recovery and growth in Japan following the war.
Someya’s own research is historical for the most part. In particular, his interest in cash flow theory was an attempt on his part to comprehend post-war inflation in Japan. His study of financial statement analysis began as a need to understand business productivity. In addition, his work on financial accounting theory was intended to shed light on securities exchange, focusing on the process of raising capital in Japan. As international business expanded in Japan starting in the 1960s, his research shifted to that area.
The book is divided into three parts. Part I covers Japanese accounting history, the most useful piece being “Accounting ‘Revolutions’ in Japan,” originally published in The Accounting Historians Journal in 1989 [Vol. 16, No. 1, pp. 75-86]. Part II is concerned with issues in financial accounting, the best piece of which is “Accounting Standard Selection and Its Socio-economic Consequences,” originally published in the International Journal of Accounting in 1993 [Vol. 28, No. 2, pp. 93-103]. Part III focuses on the cash flow statement, the most informative section being “The Use of Funds Statements in Japan,” originally published in the Accounting Review in 1964 [Vol. 39, No. 4, pp. 983-989].
In the 20 articles republished in the book (13 having been first published in Japan), Someya accentuates the role of accounting in providing accountability and information for decision making. He asserts that accounting is dynamically a function of the environment in which it prevails, and therefore should be compatible with that environment.
Someya is critical of Japanese accounting, and for good reason. In view of the emphasis that taxation exerts on accounting standards, which is typically the case in code law countries like Japan, the accounting profession appears to be weak. The Minister of Finance is responsible for setting accounting standards. Additionally, while the author does not say so, there is no fundamental conceptual framework of financial reporting in Japan. Conservatism appears to be one, if not the, basic accounting standard, and present value, lease capitalization, and inflation standards are non-existent. Furthermore, a cash flow statement is not required for external reporting, which the author does acknowledge. Someya wishes to see considerably more emphasis on economic substance rather than legal form in Japanese accounting. Moreover, he observes a need in Japan to limit the flexibility companies have in selecting alternative accounting standards in light of their social and economic consequences. Paradoxically, Japan has prospered economically despite its inadequate system of financial reporting.
For those who have no previous knowledge of Japanese accounting history, this book may be of interest. However, considerable overlap exists in topics covered among the articles in the book.
