ASBJ 39 Partial Amendments to Accounting Standard for Preparing Consolidated Statements of Cash Flows

RECENCY NOTE: Issued October 16, 2025 alongside ASBJ Statement No. 37, 38, and 40 – details should be cross-checked against ASBJ's current published materials.

Conceptual Framework Linkage

A refinement to the group cash flow statement preparation standard

ASBJ Statement No. 39 is the THIRD stage ("Part 3") of PARTIAL amendments to Japan's UNDERLYING standard governing the PREPARATION of consolidated Statements of Cash Flows – the J-GAAP counterpart to IAS 7 / ASC 230 internationally. LIKE the earlier staged reforms seen elsewhere in this poster series (e.g. Retirement Benefits, Statements No. 3/14/19), Japan's cash flow statement guidance has EVOLVED through SUCCESSIVE, INCREMENTAL amendment stages RATHER than a single comprehensive rewrite.

Scope – the Consolidated Cash Flow Statement Base Standard

Groups preparing a consolidated Statement of Cash Flows

This Statement applies to PARENT companies preparing a CONSOLIDATED Statement of Cash Flows (キャッシュ・フロー計算書) – the primary statement PRESENTING a group's cash INFLOWS and OUTFLOWS, classified into OPERATING, INVESTING, and FINANCING activities.

Why "Part 3" – a History of Staged Amendment

A recurring ASBJ pattern of incremental, multi-stage refinement

The "Part 3" designation INDICATES this is the THIRD in a SEQUENCE of partial amendments to the underlying consolidated cash flow statement standard – CONSISTENT with the SAME broader ASBJ pattern of PREFERRING incremental, staged refinement over comprehensive single-instance rewrites, ALSO seen in the retirement benefits reform (Statements No. 3, 14, 19) and the tax effect accounting amendments (No. 28, and now No. 40, "Part 2" – see the companion poster).

Likely Drivers – Coordination With the Leases and Interim Reporting Reforms

A cash flow statement update reflecting the new leases and interim reforms

Given this Statement's ISSUANCE alongside the BROADER October 2025 interim reporting package (No. 37, 38, and 40), and given the SIGNIFICANT new lease liabilities/right-of-use assets introduced by ASBJ Statement No. 34 (see the companion poster), this "Part 3" amendment PLAUSIBLY addresses HOW cash flows relating to the NEW on-balance-sheet lease model (e.g. splitting lease payments between the PRINCIPAL portion, classified as a FINANCING activity, and the INTEREST portion) should be CLASSIFIED within the consolidated Statement of Cash Flows – CONSISTENT with how IFRS 16's introduction ALSO required corresponding cash flow statement CLASSIFICATION guidance internationally. This inference reflects the SURROUNDING context of the COORDINATED reform package; the PRECISE scope should be confirmed against ASBJ's own published text.

Direct vs Indirect Method – the Underlying Framework

Both methods remain available for operating activities

The UNDERLYING J-GAAP consolidated cash flow statement standard permits EITHER the DIRECT method (presenting MAJOR classes of gross cash receipts/payments) or the INDIRECT method (starting from NET profit, adjusting for non-cash items and working capital changes) for OPERATING activities – broadly CONSISTENT with the SAME choice available under IAS 7 internationally, with the INDIRECT method being the MORE commonly used approach in PRACTICE.

Worked Example – Lease Payment Classification in the Cash Flow Statement

Splitting lease payments between principal and interest

Example: A lease payment under the new on-balance-sheet model

A group makes an annual lease payment of ¥20,000,000 under a lease recognised as a right-of-use asset and lease liability per ASBJ Statement No. 34, comprising ¥17,000,000 of principal repayment and ¥3,000,000 of interest.

Consistent with the LIKELY direction of this Statement's amendments, the ¥17,000,000 PRINCIPAL portion is classified as a FINANCING activity outflow, while the ¥3,000,000 INTEREST portion follows the group's GENERAL policy for interest classification (typically operating or financing) – REFLECTING how the new on-balance-sheet lease model REQUIRES corresponding cash flow statement classification guidance.

Disclosure Requirements

What ASBJ Statement No. 39 addresses

Classification of cash flows relating to leases recognised under the new on-balance-sheet model Reconciliation between cash and cash equivalents and the Balance Sheet

Critical Judgments & Estimates

Where judgement matters most

SIGNIFICANT JUDGEMENTS

Classification of interest cash flows as operating or financing activities Splitting lease payments between principal and interest components for cash flow presentation

SIGNIFICANT ESTIMATES

Generally minimal – this is primarily a classification and presentation matter

Relationship to IAS/IFRS

Comparison – J-GAAP vs IAS 7

The GENERAL structure of J-GAAP's consolidated cash flow statement (operating/investing/financing classification, direct/indirect method choice) is BROADLY converged with IAS 7. The SPECIFIC lease-payment classification question THIS Statement likely addresses PARALLELS the SAME classification guidance IFRS 16's introduction REQUIRED internationally, GIVEN the shared underlying shift toward on-balance-sheet lease accounting.

Statement Mapping

Where every relevant cash flow event lands

Event Statement(s) affected Notes

Lease payment cash flows SCF Principal portion as financing, interest per general policy

Related Standards

Cross-reference map

Standard Connection

ASBJ Statement No. 34 Leases – supplies the new on-balance-sheet lease liability this Statement's amendments likely address for cash flow classification

ASBJ Statement No. 37 The general interim reporting framework issued as part of the same coordinated reform package

Quick-Reference Glossary

Statement of Cash Flows (キャッシュ・フロー計算書)

The primary statement presenting a group's cash inflows and outflows, classified into operating, investing, and financing activities.

Financial statement key (Japan GAAP terminology)

BS Balance Sheet (貸借対照表) P&L Statement of Income / Profit and Loss Statement (損益計算書) Net Assets 純資産の部 SCNA Statement of Changes in Net Assets (株主資本等変動計算書) SCF Statement of Cash Flows (キャッシュ・フロー計算書)