What does ICFR stand for?

icfr

ICFR = Internal Control over Financial Reporting

In June 2006, Japan enacted the Financial Instruments Exchange Law (FIEL). The Law requires management to provide an assessment of its internal control over its financial reporting and includes a regulation entitled

Management Assessment and Audit of Internal Control over Financial Reporting for this purpose.

The reliability of financial reports has to be enforced due to several financial scandals in the US and Japan including those affecting Enron, Tyco International, WorldCom etc. In addition to financial results, companies now have to analyze and evaluate the quality of the process and controls that lead to the reported financial results.

The term J(apanese)-SOX is also quite often used in this context and is the unofficial name given to the enhanced management disclosure requirements of the Japanese "Financial Instruments and Exchange Law".

JSOX derive from the so called "Sarbanes-Oxley Act" (SOX). The Accounting Reform and Investor Protection Act, commonly called SOX, and is a United States federal law enacted on July 30, 2002 also in response to a number of major corporate and accounting scandals.

The Japanese standards require all listed companies in Japan, incl. their consolidated and parent companies, to prepare and submit internal control reports on a consolidated basis starting from the fiscal year commencing on and after April 1, 2008.

Requirements to the enhanced management disclosure of the Financial Instruments Exchange Law:

  • Introducing the statutory quarterly reporting system
  • Enhancing internal control over financial reporting
  • Issue an annual assertion on the effectiveness of internal control over financial reporting
  • Mandatory for all listed companies (public traded companies) in Japan (incl. consolidated and parent companies)
  • ICFR processes must be active starting April 1, 2008

In order to follow these standards Mitsubishi Electric Europe B.V., Germany implemented among other things the following procedures and documentations:

Document defined business processes by describing the activities, risks and controls. Establish graphical process flows according to our international company guidelines.

During periodically held testing phases the control design and the effectiveness of the controls is being checked. Internal and external audits ensure the quality of our controls on a regular basis.