072 Announcement made on audit regarding the disaster caused by the Tohoku Area Pacific Ocean Offshore Earthquake
JICPA (Japanese Institute of Certified Public Accountants) made an announcement on the title
■Example list and accounting treatments on the natural disaster.
1. Loss of fixed assets and inventories
→corresponds to the accounting treatment on insurance, requiring notes
2. Inspection and disposal cost for assets broken by the disaster
→if the inspection or disposal is done by the end of the fiscal year, they are accounted as payables. If either of them is not done by the end of the fiscal year, provision should be accounted with conditions of provisions satisfied.
3. expenses to recover the assets or expenses to prevent assets from losing their value.
→accounting treatment according to the repair cost should be applied.
4. Transfer cost of factories and operating location forced by the disaster.
→entry of loss on transfer cost should be made, and notes should be posted for the overall explanation.
5. Fixed cost generated during the stoppage period of operation caused due to the disaster.
→accounted as a loss unless it is recognized as a cost.
6. Monetary token of sympathy or condolence money to business partner who experienced the disaster, and supporting expenses for recover (including loos on exemption of payables).
→corresponds to the accounting treatment of entertainment expenses or donation.
7. Monetary token of sympathy or condolence money to employees or executives who experienced the disaster, and supporting expenses such as hotel expenses→corresponds to the accounting treatment of fringe benefit.
■accounting and auditing event to be considered regarding the disaster.
1. judgment of realizability of the deferred tax assets
2. deterioration of financial state of the business partners
3. fall in price of securities held
4. impairment test of fixed assets
5. others (such as going concern)
The current situation is making companies more difficult to handle the year-end reporting, but this announcement will give auditors and companies’ accountants a direction of how to deal with the events caused by the disaster in terms of accounting.
