Reviewed by Kenji Hayashi
Ryukoku University, Kyoto, Japan
The purpose of the book is to place in proper perspective the emerging problems of corporate accounting and accounting education in contemporary Japan, by tracing the history of Japanese accounting practices with major emphasis on the evolution of various financial statements. Supported by a mass of historical data, Professor Katano presents detailed analyses and discussions of the evolution of Japanese corporate accounting which has traditionally been under the strong influence of Western practices. Of particular interest is the account of how these Western influences have been introduced and assimilated into Japanese accounting practices.
For the purpose of descriptive convenience, Professor Katano divides the Japanese history of corporate financial statements into four major historical periods. These periods and their noted characteristics form the framework of his subsequent discussions.
The first period covers the years from 1873 (the 6th year of the Meiji Era) to 1890 (the 23rd year). The year 1873 saw the establishment of “National Bank,” the first corporate business enterprise in Japan. This pioneer period ended in 1890 when the Anglo-American corporate accounting system which had been introduced to Japan at the time of the establishment of National Bank was merged with the German-Franco accounting system which followed the enactment of the Commercial Code in 1890.
The bookkeeping and accounting practices of “National Bank” closely followed the examples of National Bank Acts of the United States and of the bank accounting practices in England. These factual events leave no doubt that the dawn of modern Japanese accounting was ushered in at this period. It also becomes clear from these descriptions that the beginning of modern Japanese accounting was made on a national scale with the government taking an active role in the introduction, the dissemination, and the regulation, of Western practices.
The second period runs from 1893 (the 26th year of the Meiji Era) to 1933 (the 8th year of the Showa Era). This period is marked by the autonomous development of corporate accounting by businesses themselves without active hands of the government. Since the beginning of the Meiji Era, the Japanese government had consistently followed its powerful policy of industrialization. With the enactment of the Commercial Code, private enterprises which had grown comfortably under the protection and control of the central government were now legally guaranteed their independent entity. With the independence comes the assumption of responsibility. They were thus obliged to develop corporate accounting procedures on their own initiative to meet their needs.
The “rationalization of industry” policy adopted at the inception of the Showa Era led the Ministry of Commerce and Industry to institute the Financial Statement Rules. These Rules had been drafted only after the arduous process of reconciliation between the Continental accounting method and the traditional Anglo-American accounting method.
The period of 12 years from 1934 (the 9th year of the Showa Era) to 1945 (the 20th year) represents the third period in Professor Katano’s presentation of Japanese accounting history. The pro-nouncement of the Financial Statement Rules (which are of extreme significance in the history of Japanese corporate accounting) by the Ministry of Commerce and Industry helped a great deal in removing some of the defects in somewhat unrestrained accounting methods practiced in the prior period. This is the period during which Japanese corporate accounting rapidly achieved rationalization and institutionalization.
The fourth period began in 1946 (the 21st year of the Showa Era) and continued to the 1960’s. In 1950, the Committee on Corporate Accounting System was formed as one of the efforts to reconstruct post-war Japanese economy through the adoption of “securities” capitalism in the United States. Guided by the doctrines of “current operating performance” and “public disclosure” in accordance with the Committee’s accounting principles, “securities” capitalism has deeply penetrated into the Japanese business community.
What characterizes the history of the Japanese accounting as revealed in the foregoing brief description is the fact that from the very beginning the Japanese accounting history has been a continuing process of refining the “system of periodic income accounting by the profit-and-loss method.” It is also clear that starting in the 5th year of the Meiji Era with the guidance of an English banker, Alexander Allan Shand, Western influences have always been present in Japanese accounting practices and thinking, but it must also be pointed out that these influences have had to undergo some modifications to suit the unique social structure in which Japanese economy—has operated. The detailed analysis of this unique historical process will be of real value to accounting historians both at home and abroad.
(Vol. 2, No, 4, p. 5, 1975)
