The Role of Financial Accounting in the Sustainable Growth of Startups

Abstract

This paper synthesizes the presentations and discussions from Session 1,“ Sustainable Growth of Startups and Financial Accounting,” at the 84th Annual Conference of the JAA（August 2025）. It examines the role of financial accounting and reporting in the formation of startup ecosystems. First, Yamamoto analyzes the institutional features and outcomes of Japan’s IPO book-building system, arguing that ensuring fairness in the IPO market requires accounting scholars to develop and propose diverse firm valuation models for practical use. Second, Kawashima highlights the importance of human capital information in startup valuation and proposes an exploratory disclosure framework incorporating human capital accounts. Third, Kawase shows that the initiation of payout policies by startups signals a transition to a more mature stage of the corporate lifecycle, and that the commencement of dividends reflects a higher degree of maturity than share repurchases. In addition, drawing on recent policy debates concerning the re-evaluation of goodwill amortization, this paper reviews the use of mergers and acquisitions by startups and discusses the potential of non-GAAP performance measures as an alternative to revising accounting standards. Overall, the analysis suggests that the integrated communication of financial and non-financial information constitutes an important mechanism through which financial accounting can contribute to the sustainable growth of startups.