On August 8, 2007, the Accounting Standards Board of Japan (ASBJ, henceforth) and the International Accounting Standards Board (IASB, henceforth) jointly announced an agreement known as the Tokyo Agreement (ASBJ and IASB, 2007) to accelerate convergence between Japanese generally accepted accounting principles (GAAP, henceforth) and International Financial Reporting Standards (IFRSs, henceforth), a process that was started in March 2005. As part of the agreement, the two boards would seek to eliminate, by 2008, major differences between Japanese GAAP and IFRSs as defined by the July 2005 the Committee or European Securities Regulators assessment of equivalence, with the remaining differences being removed on or before 30 June 2011 (ASBJ, 2007b).
After the Tokyo Agreement, Japanese GAAP, in fact, seems to be acceleratedly converged into IFRSs as shown in Table 1. Before the Tokyo Agreement, the Business Accounting Deliberation Council (BADC, henceforth), former accounting standards setter in Japan, issued the Opinion Relating to the Setting of the Accounting Standards for Research and Development Costs in 1998 and the Opinion Relating to the Setting of the Accounting Standards for Business Combinations in 2003.
The 1998's Accounting Standards for Research and Development Costs required research and development (R&D, henceforth) costs to be expensed (III.para.1), while the Financial Accounting Standards for Business Enterprises revised in 1982 permitted a company to defer both research and development expenditure (Note 15). The 2003's Accounting Standards for Business Combinations allowed some business combinations to be accounted for using the pooling of interests method (III.3) and required goodwill arising on a business combination, whether it was positive or negative, to be capitalized and then amortized on a systematic basis over its useful life (III.2(4)(5)).
Some large Japanese enterprises were afraid of a negative impact on practice resulted from the ASBJ's Practical Issues Task Force (PITF, henceforth) No. 18: Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements, which was issued in 2006 (Takahara, 2006). While it required a parent company and its subsidiaries be unified in principle, it permitted tentative treatment. That is, financial statements prepared by foreign subsidiaries in accordance with IFRSs or the generally accepted accounting principles in the United States (U.S. GAAP, henceforth) might tentatively be used for the consolidation process. However, the six items should be adjusted in the consolidation process so that net income can be accurately accounted for, unless they were not material.
Among these six items, Japanese GAAP related to both amortization of goodwill and capitalization of intangible assets arising from development phases, which differed from those of the IFRSs and the U.S. GAAP, were regarded as disadvantage in competition with Western corporations, which were active in support of mergers and acquisitions (M&A, henceforth), and had an adverse effect on a Japanese entity which costed large amount of money in R&D in such industries as pharmaceutical (Takahara, 2006).
After the Tokyo Agreement, the ASBJ narrowed most of these gaps except amortization of positive goodwill, which is today seems as one of the items related to the remaining differences between existing Japanese GAAP and IFRSs in the latest ASBJ Project Plan Table (ASBJ, 2009).
The Cabinet Order No.73 (Article 1) on December 11, 2009, amended some old rules of the Ministerial Regulation concerning Terminology, Forms and Method of Preparation of Consolidated Financial Statements. As a result, some Japanese companies could be permitted to adopt IFRs instead of Japanese GAAP (FSAJ, 2009).
It was Nakane that referred to Japanese society as a vertical organization (1970, p.40), neither horizontal nor contractual (1969, p.158). 'The ranking order which produces delicate differentiations between members of a group develops firm personal links between superior and subordinate. Such relationships form the core of the system of a group organization. A group structure based on a vertical line of this strength is demonstrably different from one based on a horizontal line.' (Nakane, p.40)
These Japanese links are applicable not only to an individual but also to an entity. Centred on a 'parent' company, A Corporation, are twelve companies known as the A Group. These companies are closely linked with A Corporation through activities or business such as sales, exports, production of parts and supply of materials. They have a direct relationship with the central A Corporation. Top executives are often transferred between these companies within the A Group; members of the A family - brothers, sons, grandsons, nephews and sons-in-law take the top positions, although the positions of president and director are not invariably the exclusive preserve of family members. Capital can also be passed readily and swiftly between these directly linked companies in case of emergency. In addition to this group of directly linked companies there are roughly two hundred more plants and factories aligned under A Corporation, on the basis of a linear relationship (which the Japanese term Keiretsu) (Nakane, 1970, pp.9596).
The original Antimonopoly Act of Japan, which was enacted in 1947, prohibited not only the formations of pure holding companies, but also, above all, in principle the acquisitions of companies' shares by the non-financial corporations. The independent Big Six groups, thereafter, appeared as a part of Keiretsu. They had a big bank, which played the decisive role as the central supplier of credit finance, and leading companies in various branches of industry (Kuroda, 2001, pp.1839-1845). M&A were, therefore, carried out exceptionally to help a member company or to give a membership (Okumura, 1994, ch.4). Moreover, as the structure of Japanese boards of directors and the processes of governance were, in those days, different from those of the West, so the Japanese did not see the need for intervention from the outside (Tricker, 1994, pp.21-22).
More than one hundred years ago, however, Nitobe (1900, ch.9) wrote that: will loyalty and its concomitant instinct of reverence disappear forever? We transfer our allegiance from one master to another, without being unfaithful to either: from being subjects of a ruler that wields the temporal sceptre we become servants of the monarch who sits enthroned in the penetralia of our hearts.
According to Reischauer and Jansen (1995, p.170), the emphasis on hard work, individual drive, and economic achievement is one of the characteristics of the Japanese. These traits are strong characteristics of all the people in East Asia - the Chinese, Koreans, and Vietnamese as well as the Japanese - who derive their underlying culture from ancient China and its Confucian attitudes. This work ethic is unquestionably associated with the drive for education all these people share, as well as with the cold climate in most of the area. It also seems to have been strengthened by the group orientation of the Japanese. A good group cooperator is also a good worker, and the camaraderie of group work can be a positive pleasure. Diligence is generally recognized by the Japanese themselves as one of their most outstanding virtues. The primary identification of the individual Japanese with his work group and his enthusiastic, even joyous, participation in its activities explains why the Japanese work ethic even today seems far less eroded.
As the Committee of Stock and Exchange of Japan, which had been expected to play a role in protections an investor independently like the U.S. Securities and Exchange Commission, disappeared in 1952 (Chiba, 1998, pp.200-201) and as some Japanese multinational enterprises seem to differ their domestic pension systems from foreign ones on or after the effective date of the Opinion Relating to the Setting of the Accounting Standards for Retirement Benefit (JICPA, 2007, pp.585-609), some latest ideas as shown in Table 1 might be absorbed into young Japanese thoughts in the same ways as their parents.
To test the relationship between M&A and Japanese work consciousness, we follow the methods used in our previous studies in addition to M&A variables (e.g., Tsuji and Tsuji, 2004; 2005; 2009) considering corporate social responsibility (CSR, henceforth) ones (e.g., Rodrigo and Arenas, 2008; Chen and Bouvain, 2009). We propose the following hypotheses:
H1: Young Japanese are preparing for the membership of the society obtaining advanced education.
H2: Young Japanese are willing to swear loyalty to an entity which they would work for not only as an individual but also as an element of the organization all through their business life with social responsibility, even though it is reorganized after M&A.
An investigation concerning Japanese work consciousness was carried out in April, 2009. The subjects consisted of 394 students from four universities; the Faculty of Economics of a public university in Osaka (University A), the Faculty of Business Administration of a private university in Osaka (University B), the Faculty of Pharmacy of a private university in Kobe (University C) and the Graduate School of Economics and Business Administration of a public university in Osaka (University D). University A and University B had few samples from other faculties of the universities since those respondents selected either social or natural science for their majors. Table 2 shows each University's frequency in this study.
Each subject of those universities was asked to answer their grade (GRADE), their gender (GENDER), their major which he/she chose between social science and natural science (MAJOR), and whether he/she was a foreign student or not (FOREIGN). Only four people turned out to be foreign students.
Table 3 indicates that samples ranged in age from 18 to 47. The average age of the samples was 19.5 years old and most of them were around 20 years old because the students from University A, University B and University C were undergraduates. On the other hand, one prerequisite for admission to University D was more than two years' work experience after university, which resulted in its average age being 35.1.
On average, 64.2 percent of the respondents were male and 35.8 percent were female. The male percentage of University A, University B and University D is higher than the female one, while University C, formerly a women's college, female students account for 80.0 percent.
As shown in Table 4, the variables of the questionnaire were categorized into four dimensions; stable employment, merger and acquisition, corporate target and family role. The first dimension presented stable employment and loyalty to an entity which had three variables. Lifetime employment was whether they wish a lifetime employment or not. Important financial result was the item they considered to be the most important choosing from growth, profitability or stability as financial results of an entity. Success in business life was about which position in the end they would occupy in their business life such as CEO, director, manager, chief or common.
The second dimension was the struggle for survival of a university or an entity. Did they hope their university to merge or acquire its competitors or be merged or be acquired by its competitors? Which would they regard as the M&A winner not formally but substantially, your school, its competitor or both? After graduating from university, which industry would they like to get a job in, food, fiber, machine, information, distribution, civil servant or banking?
The third dimension was a corporate target. Which stakeholder of an entity was main, investor, employee, customer, lender or public? What kind of responsibility, whether financial or social, should be an entity significantly assured of profit, environment, employment, supplier or law?
The fourth dimension was family role. Which item should be required for baby and child, woman's care leave, man's care leave, their grandparents' support, social support or parental benefit/ nursery allowance? Which item should be required for the old, their yokefellow's care, their child's care, profession or fiscal payment? If an entity abused for example disabled person discount, who and how should punish it? Should a consumer boycott its goods? Should the government use the power? Should a bank stop furnishing its accommodation to the entity? Or should a shareholder dispose of its equities in the market?
The data were evaluated by means of Pearson correlations and factor analysis to confirm the attributes, to explain the relationships between the variables and to test hypotheses about work consciousness of the Japanese people.
The calculated results of Pearson correlations related to the subjects' attributes are shown in Table 5. In Table 5 it is seen that UNIVERSITY, GRADE, AGE and MAJOR are positively correlative with each other. GENDER is negatively related to MAJOR and FOREIGN.
Among 394 subjects, 298 subjects considered EMPLOY to be desirable while 96 to be undesired. As FINANCIAL, 108 subjects selected Growth, 64 selected Profitability and 222 selected Stability. Each number of the responses to the items about SUCCESS were 126 for CEO, 143 for Director, 79 for Manager, 23 for Chief and 23 for Common employee, respectively.
EMPLOY is positively correlative with AGE (0.152**) and is negatively related to both FINANCIAL (-0.176**) and SUCCESS (-0.172**). SUCCESS is negatively related to GENDER (-0.311**) as well as EMPLOY. In addition, SUCCESS is positively correlative with both MAJOR (0.155**) and FINANCIAL (0.192**).
M&AORIEN is positively correlative with both UNIVERSITY (0.131**) and RESPONSIBLE (0.152**). CHILD is positively correlative with ELDERLY (0.108**).
Then, factor analysis was carried out. Table 6 shows the sum of variances resulting from the principal component analysis and Table 7 indicates the component matrix of factors after varimax criterion.
Based on the result of the first factor as shown in Table 6, we evaluated the data only from University A by means of Pearson correlations and factor analysis. EMPLOY is negatively related to both FINANCIAL (-0.240**) and SUCCESS (-0.148**). FINANCIAL is positively related to both SUCCESS (0.309**) and INDUSTRY (0.166**) as well as above negative EMPLOY. Besides, SUCCESS is positively correlative with GRADE (0.184**) and is negatively related to GENDER (-0.330**). M&AORIEN is positively correlative with RESPONSIBLE (0.153**) and M&AEQUAL s negatively related to STAKEHOLD (0.201**).
The sum of variances resulting from the principal component analysis is shown in Table 8. According to the component matrix of factors after varimax criterion, the first factor has GRADE (0.868) and AGE (0.867), the second one has FINANCIAL (-0.738) and EMPLOY (0.723), and the third one has GENDER (-0.765) and SUCCESS (0.704).
We refer to the first factor as the present status in universities and the second factor as the preliminary move to the potential status. The Japanese university students verify what they are and prepare for the membership of the society obtaining advanced education. In Japan, a selection of university is a selection of their majors in most cases. They have to decide their majors before entering the university. Students are getting more conscious of their future status in society every year. What they are and what they will be do not depend on their gender today.
The third factor is referred to as membership in an entity and the fourth factor as relative corporate value for the third party. All through their business life, and even after their retirements, in some cases Japanese students will work for a company with their loyalty. It is important for them to belong to it, neither to occupy a higher position in it nor to earn a good salary from it. The corporation they will work for bear a responsibility for the society. They will never lose their loyalty to it even after it is merged or acquired by another company. They will work for their new organization with the same loyalty as before. It is interesting to note that the results of the students only from University A demonstrate the similar conclusions to the results of the whole data. Publicized through the media, a merger with its competitor, which the prefecture planned to carry out and failed after all, suddenly faced them in February, 2009.
The new accounting standards for M&A and for R&D would expect Japanese corporations to bring out more and more M&A nationally and internationally.
Young Japanese are preparing for the membership of the society obtaining advanced education and are willing to swear loyalty to an entity which they would work for not only as an individual but also as an element of the organization all through their business life with social responsibility, even though it is reorganized after M&A.
One of the objectives of the International Accounting Standards Committee Foundation is to bring about convergence of national accounting standards and IFRS to high quality solutions. An entity should provide its financial information which is useful for stakeholders to make decisions as capital providers. In addition, the entity is working with society to achieve sustainable development, respecting a code of conduct and taking its responsibilities for a stakeholder, CSR. In such an internationalized circumstance, it might be not so difficult for not only the Japanese but also for all the people in East Asia to be responsible for both local and global societies.
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Mineo Tsuji, Osaka Prefecture University, Japan
Yukie Tsuji, Otemon Gakuin University, Japan
Table 1: Chronology of Accounting Standards for M&A and for R&D in Japan Title Issuance Date Accounting Standard for Business December 26, 2008 Combinations (ASBJ Statement No.21) Accounting Standard for Consolidated December 26, 2008 Financial Statements (ASBJ Statement No.22) Partial amendments to Accounting December 26, 2008 Standard for Research and Development Costs (ASBJ Statement No.23) Partial amendments to Practical Solution December 26, 2008 on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements (ASBJ PITF No. 18) Practical Solution on Unification of May 17, 2006 Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements (ASBJ PITF No. 18) Opinion Relating to the Setting of the October 31, 2003 Accounting Standards for Business Combinations inclusive of the Accounting Standards for Business Combinations (BADC) Opinion Relating to the Setting of the March 13, 1998 Accounting Standards for Research and Development Costs inclusive of the Accounting Standards for Research and Development Costs (BADC) Opinion Relating to the Setting of the June 6, 1997 Revision of the Consolidated Financial Reporting System inclusive of the Financial Accounting Standards for Consolidated Financial Statements with the revised Commentaries on Consolidation Standards (BADC) Opinion Relating to the Codification of June 24, 1975 the Consolidated Financial Statements inclusive of the Financial Accounting Standards for Consolidated Financial Statements with the Commentaries on Consolidation Standards (BADC) Annotation to Financial Accounting July 9, 1954 Standards for Business Enterprises (Investigation Committee of the Economic Stabilization Board) Table 2: Respondents of This Study Number of Effective Frequency UNIVERSITY Respondents Percent University A: 280 94.6 265 Faculty of Economics, Osaka University B: 130 71.5 93 Faculty of Business, Osaka University C: 20 100.0 20 Faculty of Pharmacy, Kobe University D: 17 94.1 16 Graduate School of Economics, Osaka Total 447 88.1 394 Table 3: Respondents' Age and Gender AGE: GENDER: UNIVERSITY Average Maximum Minimum Female (%) Male (%) A 18.5 26 18 98 (37.0) 167 (63.0) B 19.5 25 19 25 (26.9) 68 (73.1) C 19.8 22 19 16 (80.0) 4 (20.0) D 35.1 47 24 2 (12.5) 14 (87.5) Total 19.5 47 18 141 (35.8) 253 (64.2) Table 4: Study Variables and Measures Variable Variable Name Measure I. Stable employment 1. Lifetime employment 1. EMPLOY 1. wishful / not 2. Important financial 2. FINANCIAL 2. growth / result profitability / stability 3. Success in business 3. SUCCESS 3. CEO / director life /manager /chief / common employee II. Survival of university 1. Orientation to M&A 1. M&AORIEN 1. My school and its rival should be merged / not / other 2. Equality in M&A 2. M&AEQUAL 2. My school is advantageous / disadvantageous / equal 3. Industry to get a 3. INDUSTRY 3. Foods / fiber / job in machinery / information / retail/ civil servant / banks III. Corporate target 1. Main stakeholder 1. STAKEHOLD 1. investor / 2. RESPONSIBIL employee / customer / lender / public 2. Main responsibility 2. profit / environment / employment / supplier / law IV. Family Role 1. CHILD 1. woman's care 1. Child-Support leave / man's care leave / grandparents' support / social support / allowance 2. Nursing Care for 2. ELDERLY 2. yokefellow / the Elderly child / profession / fiscal payment 3. Discipline of a 3. CRIMINAL 3. consumer's criminal firm boycott /national power /cutting of bank accommodation / equities' disposal Table 5: Results Related to the Subject's Attributes UNIVERSITY GRADE GENDER AGE MAJOR FOREIGN UNIVERSITY GRADE 0.474 ** GENDER AGE 0.137 ** 0.765 ** MAJOR 0.168 ** 0.159 ** -0.197 ** 0.131 ** FOREIGN -0.136 ** ** = significant at 0.01 Table 6: Sum of Variances Resulting from Principal Component Analysis Variance Accumulative Factor Sum Percent Percent 1 2.080 12.238 12.238 2 1.522 8.953 21.191 3 1.387 8.159 29.350 4 1.275 7.497 36.848 5 1.247 7.336 44.184 6 1.173 6.900 51.083 7 1.148 6.751 57.834 Table 7: Component Matrix of Factors after Varimax Criterion Factor Factor Loading 1 GRADE AGE UNIVERSITY 0.922 0.860 0.483 2 GENDER SUCCESS MAJOR -0.768 0.622 0.497 3 EMPLOY FOREIGN FINANCIAL SUCCESS 0.617 0.611 -0.571 -0.443 4 RESPONSIBIL M&AEQUAL M&AORIEN 0.690 0.580 0.500 5 ELDERLY 0.761 CHILD 0.689 Table 8: Sum of Variances Resulting from Principal Component Analysis Variance Accumulative Factor Sum Percent Percent 1 1.698 11.323 11.323 2 1.401 9.341 20.664 3 1.399 9.328 29.992 4 1.317 8.779 38.771 5 1.285 8.568 47.338 6 1.235 8.233 55.571…