Japan FSA Seeks Comment on Financial Statement Rule Changes for New Income Tax Standard

Key Takeaways

• Japan's Financial Services Agency is soliciting public comments on a draft Cabinet Office Ordinance amending the Financial Statements Rules and Consolidated Financial Statements Rules.
• The amendments align the rules with revised ASBJ accounting standards, including Standard No.
• 27 on corporate income tax, and designate recently published standards as generally accepted.
• Compliance and financial reporting teams at Japan-listed or Japan-reporting entities should assess impacts and consider submitting comments before the October 16, 2026 deadline.

Deep Dive

Japan's Financial Services Agency is soliciting public comments on a draft Cabinet Office Ordinance amending the Financial Statements Rules and Consolidated Financial Statements Rules. The amendments align the rules with revised ASBJ accounting standards, including Standard No. 27 on corporate income tax, and designate recently published standards as generally accepted. Compliance and financial reporting teams at Japan-listed or Japan-reporting entities should assess impacts and consider submitting comments before the October 16, 2026 deadline.

The draft has two parts. First, it revises the Financial Statements Rules and the related Guidelines to reflect the revised ASBJ Accounting Standard No. 27 (Corporate Income Tax, etc.) and the ASBJ exposure draft of Practical Guidance No. 74, which would amend No. 45 and address interim accounting and disclosure for specific electronic payment instruments under the Payment Services Act. The ASBJ comment period for that exposure draft runs from August 17 to October 19, 2026. Second, it amends the FSA designation notices so that ASBJ standards published through July 7, 2026 count as generally accepted accounting standards under Article 1, Paragraph 3 of both rule sets. These include revised Standards No. 10 (Financial Instruments) and No. 22 (Consolidated Financial Statements), published June 2, 2026, and revised No. 27, the partial amendment to No. 43 (Tax Effect Accounting), and the partial amendment to No. 44 (Consolidated Cash Flow Statements), published July 7, 2026.

Comments are due by 5:00 PM on Friday, October 16, 2026, and must arrive by that time. They can be submitted by mail or through e-Gov, but not by telephone. The ordinance takes effect on promulgation. However, the FSA plans to implement rules related to ASBJ Exposure Draft No. 99, a proposed partial amendment to the consolidated cash flow statement standard, based on the effective date the ASBJ sets after finalizing that draft. Note that the October 16 FSA deadline falls before the October 19 ASBJ deadline, so entities should coordinate their responses. Submissions may be disclosed with the submitter's name unless anonymity is requested, and the FSA will not respond individually.

Financial reporting, tax, treasury, and compliance teams should:
- Map the amended standards (Nos. 10, 22, 27, 43, and 44) against current policies, systems, and disclosure templates.
- Review Attachments 1 through 7 for form and guideline changes.
- Assess exposure to the electronic payment instrument treatment, particularly for payment service providers and banks.
- Decide whether to file comments, directly or through industry associations.
- Brief auditors and the disclosure committee, and monitor the final ordinance and the Exposure Draft No. 99 effective date.

Immediate-effect rules on promulgation could compress implementation time for the standards that take effect early. The risks are mainly financial reporting accuracy and disclosure errors in securities filings, along with weaknesses in internal controls over financial reporting if processes are not updated. Tax effect accounting and consolidated cash flow changes may affect reported results and require data and system changes. Overall impact is moderate, and higher for groups with significant deferred tax balances, financial instruments, or electronic payment activities.

Source: Financial Services Agency (Japan)