From Sumitomo Corporation to Accounting on the Global Stage: An Aoyama Gakuin Professor Shaping Global Standards

To begin, could you tell us why you joined Sumitomo Corporation, and what your first assignment was?

I was drawn to the company's regional Kansai character and steady, down-to-earth corporate culture. It was an era when the financial industry was undergoing major change in the wake of the Nixon shock, and I was interested in foreign exchange, so I hoped to join a finance-related division. However, I was assigned to what is now the Accounting Controlling Department. To be honest, I didn't find the work very engaging at first, and for the first few years I couldn't say I was highly motivated.

What changed the situation for you?

In 2006, while still at Sumitomo Corporation, you were appointed to the IFRS Interpretations Committee and stepped onto the international stage.

At that time, Tatsumi Yamada, a Sumitomo Corporation alumnus and my predecessor in the U.S. accounting role, was serving as a Board Member of the International Accounting Standards Board (IASB). He recommended me for the position, and I took on the committee role in parallel with my work at the company. The IASB is the body responsible for setting IFRS, which aims to establish globally consistent accounting standards. The IFRS Interpretations Committee, operating under the IASB, plays a key role in determining how IFRS should be applied in practice. When I joined in 2006, IFRS principles had been outlined, but many interpretative details were still under development.

What was your experience like working in an international organization?

All the other members were senior partners or global leaders from major auditing firms. At first, I felt as though I'd stepped up to bat in the major leagues after only ever playing sandlot baseball. But as discussions progressed, it became clear that in some areas, my hands-on experience at Sumitomo Corporation gave me a deeper practical insight than even those accounting specialists.

One example involved the accounting treatment of stripping costs in open-pit mining*. In open-pit mines, large amounts of overburden – the surface layer of soil or rock – must be removed before extracting the ore beneath. IFRS at the time had no specific guidance on how to account for these costs, and practices varied among companies. Removing the overburden incurs costs, but are they simply "expenses," or are they, in effect, an "asset" because they lead to future benefit? Since Sumitomo Corporation was involved in open-pit mining projects, I was able to consult with colleagues who were deeply familiar with the practical realities and bring those insights into the discussion.

So your Sumitomo Corporation experience and network became powerful assets in that international arena?

In 2011, you left Sumitomo Corporation and became a Board Member of the IASB.

When Mr. Yamada's term ended, I was selected as his successor, thanks to my work on the IFRS Interpretations Committee. The IASB, modeled after the FASB, consisted of 14 members. To maintain independence, Board Members were required to resign from any corporate positions, which meant I had to leave Sumitomo Corporation to take on the role.

What was most challenging about serving as an IASB Board Member?

The IASB brings together accounting experts from around the world. I was the only Japanese member. If I had spoken as though representing Japan's national interests, I would have been dismissed as someone without an independent professional opinion. At the same time, there were aspects of Japan's unique economic realities that only I understood. If I failed to introduce those perspectives, the quality of the resulting standards would have suffered. So I worked very carefully to maintain neutrality while still ensuring that Japan's realities were properly reflected, all the while keeping the ultimate goal of "creating high-quality accounting standards" firmly in focus. It was a profound challenge, but the sense of fulfillment that came in helping shape standards underpinning the global economy was truly extraordinary.

You're now working in academia. How does it compare with business?

How would you define the essence of accounting?

I'd say it's about capturing and conveying the realities of a dynamic economy to investors. Unlike mathematics, accounting has no single "correct" answer; it's about repeated discussion and reaching consensus. The key question is: on what basis do we make those judgments? The foundation lies in a commitment to providing information that is useful to investors' decision-making, presenting both the good and the bad transparently. This principle is known as the "true and fair view."

The IFRS, which I have long been involved with, adopt a principles-based approach, in contrast to the rules-based nature of Japan's accounting standards. IFRS may seem more flexible because they set only broad principles, but in reality, they demand that each individual involved in accounting possess the discernment to identify what is true. In that sense, IFRS impose a kind of rigor all their own.

Do you think Sumitomo Corporation embodies the essence of accounting?

Absolutely. Sumitomo Corporation's accounting team, guided by the "true and fair view" and committed to conveying useful information to investors, is unquestionably among the best in Japan. When I review Sumitomo Corporation's financial disclosures, I can see that the company reports both successes and setbacks with honesty and transparency. That openness reflects the integrity that Sumitomo Corporation values so deeply.

Finally, what are your hopes for Sumitomo Corporation going forward?