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1. Accounting

The ruling Liberal Democratic Party held a meeting of the financial research council corporate accounting subcommittee in May. The following is an excerpt of the question-and –answer session (Q: Diet member, A: Councilor).

Q. It’s been deemed necessary to increase the number of companies adopting IFRS. What’s the progress on the target number 300? A. We recognize that the Japanese way to expand the adoption of IFRS is highly praised even abroad. However we need to do it faster. So we’re considering summarizing actual cases of how to adopting IFRS for other companies’ information and use.

Q. How about the recent trend of U.S.? A. There are problems of the convergence between U.S. standards and IFRS, and the application of IFRS to domestic companies in U.S. The prospect for expansion of the former is sluggish, and that of the latter is completely unpredictable.

Q. Increased J-IFRS means decreased Pure-IFRS. How do you see this being balanced? A. I believe most companies that adopt IFRS will select Pure-IFRS.

Q. What do you think of the recommendation to report on progress for IFRS adoption by the listing rules? A. I think that it’s within the scope of the Tokyo stock exchange, but I believe we share a goal with them to attract overseas investors by the expansion of IFRS adoption.(Source:“Keiei Zaimu Magazine” No.3165)

2. Taxation (Addition of profit level indicator)

By the 2013 tax reform, the Berry ratio was added to the list of profit level indicators of TNMM (Transactional net margin method) for calculation of arm’s length price of transfer pricing taxation. This provision will be applied to the fiscal year which starts on or after April 1, 2013.

The Berry ratio is determined by dividing a company’s gross profits by its operating expenses. It is a very powerful tool in analyzing profit ratio in proportion to increasing operating costs (e.g. employment cost) such as those carried out by a sales broker.(Source: “Zeimu Tsushin Magazine” No.3314)

3. Labor Management(Annual Revision of Monthly Standard Remuneration for Social Insurance)

Health insurance premiums and Pension insurance premiums, which are deducted from employees’ salaries, are determined based on the amounts of employees’ Monthly Standard Remuneration. This Monthly Standard Remuneration is revised annually so it does not vary widely from the actual amount of remuneration received by an employee. This revision is called Annual Revision of Monthly Standard Remuneration, and it applies to all employees who are covered by Health and Pension insurance.

In principle, Monthly Standard Remuneration is determined based on the average amount of an employee’s remuneration paid in April, May and June, though the determination process may vary depending on various factors, such as the number of days worked, changes in remuneration amounts, etc. An employee’s remuneration, in the context of this article, includes base salary, commuting allowance, overtime allowance and other such monthly allowances and allowances in kind.

The insurance premiums are revised based on the Monthly Standard Remuneration newly determined by this annual revision, and the actual changes become effective for all premiums from the month of September. (Health Insurance Act, Article 41)

4. This Week’s Words of Wisdom

“If you consider something seriously for three hours and decide your conclusion is correct, your conclusion will not change even if you think upon it three years.”(Anonymous)

I visited the area affected by the Great East Japan Earthquake. I know nothing about what’s going on with the use of the bulldozed land. After the disaster, the government should have taken appropriate steps to handle natural disasters (for instance, moving dwellings upland, uniting several fishing ports in one place, etc.), but they couldn’t. Therefore, it’s faced with the same situation as before the earthquake. I also don’t understand why the government did not clearly state that the area around the nuclear plant was uninhabitable.

The referring page is Nagamine & Mishima JC Accounting K.K.

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