General in Japan

Key dates

2026-07-23

EFRAG published the ESRS-40a Exposure Draft and opened a 100-day public consultation.

2026-10-28

The Government of Japan dated its comment letter on the ESRS-40a Exposure Draft.

2026-10-31 Deadline

EFRAG's public consultation on the ESRS-40a Exposure Draft closes.

2027-01-01

EFRAG is expected to deliver technical advice on ESRS-40a to the European Commission.

2028-01-01

The first financial years to which the proposed Article 40a reporting framework is expected to apply are expected to begin on or after this date, subject to adoption of the final rules.

2029-01-01

The first ESRS-40a reports are generally expected to be published in 2029 for financial years beginning on or after 2028-01-01, subject to the final delegated act and applicable publication timing.

Suggested considerations

• Compliance teams may wish to map group and EU-entity turnover against the Article 40a thresholds, using the preceding financial year for the EUR 200 million subsidiary or branch test and each of the preceding two financial years for the EUR 450 million EU-turnover test.
• In-scope groups should monitor the outcome of the EFRAG consultation, the expected January 2027 technical advice and the European Commission's subsequent delegated act before treating any ESRS-40a exposure-draft provision as final.
• Reporting teams should compare existing ISSB-aligned or jurisdictionally mandated sustainability reporting with the ESRS-40a requirements and identify likely top-ups, particularly disclosures not covered by ISSB Standards.
• Groups may wish to model the data, governance and assurance consequences of global reporting, the proposed mixed approach and Japan's suggested EU-impact-focused alternative.
• EU subsidiaries and branches should clarify with their non-EU parent whether the reporting obligation will be met through an incorporated group report, an ESRS-40a report or another permitted equivalent, including arrangements for publication, accessibility and assurance.
• Stakeholders wishing to influence the final standard should consider submitting comments to EFRAG by the consultation deadline, including evidence on duplicative disclosures, EU-impact scoping and interoperability with ISSB-aligned standards.

What changed

The Government of Japan proposed that EFRAG clarify which ESRS-40a disclosure requirements would remain as top-ups where a non-EU group incorporates by reference a group sustainability report prepared under jurisdictionally mandated standards functionally aligned with ISSB Standards. Japan also proposed adding an alternative to the Exposure Draft's mixed approach that would reduce the reporting burden on non-EU companies while requiring reporting of all EU-related impacts. The Exposure Draft itself is a consultation proposal rather than a final binding standard.

Key dates

2026-10-16

The FSA published the exposure-draft consultation materials prepared by the Audit Standard Committee of the Business Accounting Council.

2026-11-16 Deadline

Public comments close at 5:00 p.m. JST.

Suggested considerations

• Audit firms should review the exposure draft against current Japanese Auditing Standards, the Standard to Address Fraud Risks, ISA 240, and ISA 570, and identify differences in required procedures, documentation, communications, and reporting.
• Issuers and other audited entities should assess whether their going-concern assessment process, cash-flow forecasts, stress testing, remediation plans, and financial-statement disclosures can support a more demanding auditor review.
• Finance and audit-committee functions should consider whether management’s documented assessment period extends to at least 12 months after the financial statements’ authorization date, as indicated by independent commentary on the draft.
• Audit committees and supervisory boards should consider whether existing oversight of fraud-risk assessment, management override, whistleblowing, unusual transactions, and remediation of control deficiencies addresses issues highlighted by recent Japanese fraud cases.
• Eligible stakeholders should consider submitting comments to the FSA by 5:00 p.m. Japan Standard Time on November 16, 2026, particularly on transition timing, the scope of enhanced going-concern reporting, and the interaction between the Japanese standards and international standards.
• Multinational groups should monitor the final Japanese requirements and compare them with the going-concern and fraud-audit requirements applied to the group under ISA or other local auditing frameworks.

What changed

The consultation proposes revisions requiring auditors to take more appropriate and consistent actions regarding the going-concern assumption and to enhance explanations and information provided about going-concern matters, while maintaining consistency with international auditing standards. It also initiates a review of the alignment between International Standards on Auditing, Japanese Auditing Standards, and Japan’s Standard to Address Fraud Risks, including whether the standards adequately address lessons from recent fraud cases.