182 InManagersWeTrust
companies to allocate the bad accounting news to affiliates, making
the parent company’s books look much better. New Japanese rules
also require listing real estate held for sale at its current market value
if that value has fallen more than 50% from the original cost. The
absence of this new rule fueled the Japanese speculative bubble of
the 1980s that cratered gradually throughout the 1990s (described in
Chapter 5).
Around the world, increasing numbers of non-U.S. and non-
English-language corporations are ahead of schedule in adopting in-
ternational accounting principles and reporting their results in the
English language. Nissan, for example, adopted consolidation ac-
counting principles in late 1999, six months ahead of schedule, and
issued related press releases about that period’s results in English,
an unimaginable act for a Japanese corporation just a decade ago
(even one that is partly French-owned).
When Nissan reported its annual financial results in mid-2000,
using international accounting principles, they showed staggering
losses of $6.3 billion. Contributing to those losses were recognition
of pension liabilities and the costs of plant closings and the assign-
ment of more realistic values to real estate and securities holdings.
Although a number of other substantive factors contributed to these
results, investors considering investment in non-U.S. companies
must understand that accounting principles elsewhere are not always
what they seem.
The United States is harmonizing its accounting principles with
those prevalent worldwide. In October 1996, Congress passed the
National Securities Markets Improvement Act of 1996, which re-
quires the SEC to report to Congress on progress in developing in-
ternational accounting standards. The SEC has worked with the In-
ternational Accounting Standards Committee (IASC) for nearly a
decade to promulgate a core set of accounting pronouncements. In
October 1997 the SEC published a report to Congress on the pro-
gress of the IASC, and it joined organizations throughout the world
in supporting the IASC’s initiatives.
The finance ministers and central ban kgovernors of the G7
countries proclaimed support for the IASC and encouraged it to
complete a proposed set of core principles promptly. Additionally,
the World Ban krequested the world’s “Big Five” international au-
diting firms to insist that companies prepare their financial state-
ments in accordance with international accounting standards. Lead-
ing voices from around the world, including Tony Blair, the United