Editor's letter
Recent moves by the Accounting Standards Board of Japan and the US Financial Accounting Standards Board towards convergence with International Financial Reporting Standards (IFRS) have wide implications for Asia’s derivatives market.
Following the issuance of a new derivatives accounting rule, FAS 155, in the US in February to replace the previous FAS 133 – a move that aims to simplify accounting for hybrid financial contracts – Japan’s accounting body in April issued revised rules for inflation-linked government bonds and synthetic collateralised debt obligations (CDOs). Under the new rules, such products could qualify for exemption from ‘bifurcation’ requirements – under which embedded derivatives are accounted for separately from the host contract – and instead be treated as single instruments in the accounting books.
It is even possible for synthetic CDOs to be exempt from mark-to-market requirements and classified as hold-to-maturity instruments – the same treatment as for cash bonds. There are signs that this accounting change is driving new demand for synthetic CDOs from Japanese investors, with a few private deals being done in recent weeks as a direct result of the change – see our cover story.
These are the latest steps in long-standing reforms of Japanese accounting standards since the late 1990s. At the time, weak accounting practices led to widespread corporate defaults, a surge in bad loans and financial scandals that shocked the markets. The market is still feeling the repercussions today, as seen in the recent suspension of Chuo Aoyama PwC – the local affiliate of accounting firm PricewaterhouseCoopers – for two months by the Financial Services Agency after three of the company’s auditors allegedly certified false accounts of a client.
Auditors in Japan are known to maintain very close relations with clients, to such an extent that it hinders their ability to disclose financial window-dressing by the client company’s management. The event also highlights the need to address risk management and corporate governance issues at accounting firms.
This month, we publish the results of our annual derivatives end-user survey, the most competitive since its launch in 2000. Global investment banks have traditionally topped the poll, and this year is no exception. However, some domestic regional banks scored impressively, with some ranking ahead of the multinationals in certain categories. Many thanks to all those who participated.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Top 10 op risks: third parties stoke cyber risk
- Japanese megabanks shun internal models as FRTB bites