They issued a new accounting standard on 4 December 2009. According to this standard, changes in accounting policies are exposed to retrospective application if not affected by special provision from other standards. They are also expected to restate the past data of comparative period presented in the financial statements when they find errors that should be corrected.
This standard will be effective for the disclosure of financial statements for the year beginning from 1st April 2011 or after. Accompanied by the issue of this standard, related standards are also soon to be revised.
According to Tax Reform in 2009, dividends and such
received from foreign subsidiaries which were included in
gross revenue get excluded from gross revenue. Along with
this change, Controlled Foreign Companies law has been
revised. The amount of dividends and such is added up in
Japanese parent companies whether or not there are
dividends paid by specific foreign subsidiaries such as those
founded in tax havens. When Japanese parent companies
receive dividends from dividends and such which are subject
to being added up, these dividends are excluded from gross
revenue in principle. In this case, the amount excluded from
gross revenue is not a 95% of dividends, but all of them.
Family corporations are generally owned by a few family members, and it is considered to be easier to make some transactions for tax avoidance. Examples are as follows; selling at cheaper price to related companies and lending money with no interest to subsidiary companies. To prevent these actions, Corporation Tax Act 132 stipulates that they can deny actions or calculations for inappropriate tax avoidance. However, there is no solid article that says what kind and how much are considered to be tax avoidance, so it depends on the judgment of a chief of each tax office.
Therefore, the judgment is subjective, and if your family corporation plans to conduct a large scale of tax shelter, you might want to bear in mind that it is possible that they deny the calculation of action.
Financial Services Agency held on 30 July 2010 a forum
discussion for “The 9th forum discussion about Certified
Public Accountant System”. Published documents describe
“an interim progress report about CPA System”, and mention
a plan to create a certificate of “an accounting profession”.
The name of the new certificate is called “Financial
Accountant (provisional)”. They have yet to make some
adjustments in detail until they determine, but its position
is almost the same as a Pre-Accountant, called in the old
exam system. By the way, Audit & Assurance is still exclusive
to CPAs, same as before.
This reform has been considered since some incidents
such as unemployment of exam passers and corporate
accountants, and globalization of accounting tasks. It is
interesting that they newly added IT and English subjects
to the exams so that they could reflect the today’s requirements.
ASBJ announced on 30 July 2010 the overall conclusion
of the meeting on accounting standards for unlisted companies.
The purpose of this meeting is to consider how the accounting
standards for unlisted companies should be when they
internationalize the Japanese accounting standards, taking
into account that they have received some opinion that the
influence to unlisted companies should be as little as possible.
They have categorized unlisted companies as follows as
a result of discussion, and accounting standards and
implementation guides should differ from one category to
another.
①Unlisted companies subject to Financial Instruments and
Exchange Act（FIEA）: The same accounting standards as
listed companies should be applied as before.
②Large Companies subject to Companies Act but not
subject to FIEA: Basic accounting standards are the same
as listed companies’, but some of the accounting and
disclosure can be simplified.
③Companies that are not defined as Large Companies under
Companies Act: They will make some other categorizations,
and under those categories new accounting guides are to be
prepared, which are different from guides for SMEs.
Unlisted companies are expected to hold fewer stakeholders
than listed companies as a whole, and application of new
international accounting standards could make a situation
where the cost of application could exceed its benefit. To
avoid this situation, they will set accounting standards and
implementation guides suitable for them in terms of size and
their circumstances. This will help the company directors
to concentrate more on the management of their business
than on complicated accounting standards, which we think
will eventually lead to economic growth.
Tokyo Stock Exchange made it public on June 29 2010
that they revised some of the regulations for listing based
on “reconsideration of timely disclosure of quarterly
reports and preparation of listing system with regard to
voluntary application of IFRS”
They revised the listing regulations from the perspectives
of the following three aspects.
①Reconsideration of timely disclosure of quarterly reports
②Environmental improvement for corporate governance
③Voluntary application of IFRS
They have also revised the way of conducting accounting
reviews for listing and some of the regulations of delisting.
So, we need to be careful about them.
Since the Tax Reform in 2010, the tax rate on which the reduced tax rate is based has been brought down from 25% to 20%. This basic rate is called trigger tax rate. For example, Chinese corporation tax rate has exceeded trigger tax rate, so that the CFC laws has become no more effective against corporations founded in China. Besides, the rate of share within which it is not subjected to the CFC law has been extended from 5% to 10%. Because of this, we believe that foreign investment to China is going to be accelerated. This reform is going to be effective from the accounting year beginning after April 1, 2002.
Sales incentives are the amount of money paid to retailers
from manufacturers, which is basically included in nontaxable
expenses. However, this expense would be regarded as
“donation” if its purpose is to fill the deficit of your clients
even though it is expensed as sales incentives at first. And
it would be an “entertainment expense” if you invite your
clients on a trip or to go see a play as an incentives. Therefore,
its nature differs depending on its purpose. This is where
you have to be careful because it is also regarded as an
entertainment expense in the case you are not making the
purpose of paying sales incentives clear enough. As a result
the entertainment expense would be excluded from nontaxable
expenses, and they would ask you to pay penalty tax, which
is in fact what happened before.
ASBJ announced a new standard of Comprehensive Income on 30 Jun, 2010.
They were going to announce during March at first, but postponed till today.
This brings to everyone’s attention because valuation adjustment, which is directly reported as a component of shareholders’ equity, now should be reported as a part of profit. This is going to be effective against financial statements for the year ended after 31 March, 2011.
However, this is not going to be applied to all the financial statements. Individual financial statements and ones of unlisted companies do not have to be presented because users’ needs are different, and whether they also have to present theirs in IFRS basis has yet to decide.
It is understandable that coordination of many people’s opinion, but we expect them to determine what to do with this pending issue of unlisted companies which occupies the vast majority of all the companies in entire nation.
Accounting Standard Board of Japan issued the revised
accounting standard 2 “the accounting standard for earnings
per share,” revised accounting standard 4 “implementation
guide for earnings per share,” revised the Practical Issues
Task Force 9 “Practical solution on earnings per share.”
This revision has accompanied with the application of “the
accounting standard for Accounting Policies,Changes in
Accounting and Errors.”
Points of the revision
・In case that the retrospective application or retrospective
restatement is made in the financial statements according
to the revision of “the Accounting Policies,Changes in
Accounting and Errors,” the amount must be calculated
after the retrospective application or restatement of earnings
per share.
・In case that the stock split or reverse stock split is made,
the calculation of earnings per share must be made as if the
stock split or reverse stock split were made in the beginning
of the oldest period presented in the financial statements.
We have to pay attention to the revision of other accounting
standards accompanied with this application of “the
Accounting Policies,Changes in Accounting and Errors.”
