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1. Accounting(Disclosure of basic views on selection of accounting standards.)

The Tokyo Stock Exchange, in line with the recommendation on “Japan Revitalization Strategy(Revised in 2014)” which was approved by the Cabinet on June 24, 2014, requires listed companies to disclose their basic views on the selection of accounting standards in their earnings reports.This requirement is first applied to the summary of financial results for the fiscal year ending on or after March 31, 2015, and there is considerable interest in the description of the disclosure. In the cases which have been released so far, listed companies describe them concisely and with more detail about their intention to sustain Japanese standards, with explanations of the company’s circumstances like business deployment, financing environment, etc.We provided the example of such a disclosure of Nidec Corporation(Nihon Densan) as follows:

“We are planning to adopt International Financial Reporting Standards (IFRS) from the fiscal year ending March 31, 2017 to strengthen and improve the efficiency of financial reporting. We are currently evaluating the details of, and timeline for, the transition..”(Souce:“Keiei Zaimu Magazine”No.3210)

2. Taxation (Modification of the calculation method for taxable income attributable to a PE & Documentation.)

For the annual periods beginning on or after April 1, 2016, the Attributable Income Principle, which relates to the computation method of the taxable income of foreign companies with a Permanent Establishment (hereinafter “PE”) in Japan, will be in effect. Under the Attributable Income Principle, a PE in Japan should differentiate between external transactions with third parties and internal dealings with its head office and other parts of the company of which the PE is a part. The internal dealings will be treated in the same way as under transfer pricing rules to validate the price of internal dealings.

In addition, it will be obligatory to produce documentation describing the business lineups of the PE and, the functions performed, risks assumed and assets used by the PE. It’s expected to increase the already heavy burden on companies. Furthermore with less than 1 year to go before the enforcement, immediate action is needed.

3. Labor Management(Annual Renewal of Labor Insurance)

The labor insurance premium is calculated for each insurance year, and it runs from April 1st to March 31st the following year. The insurance premium is calculated by multiplying the total amount of the wages paid to all the workers (or all the insureds for Employment Insurance) by the premium rates predetermined by the Minister of Health, Labor and Welfare in accordance with business categories. The premium rates are revised every three years in principle, considering some factors such as the occurrence of industrial accidents in the past three years. This year, the premium rates were reduced by 0.1/1000 on average in all 54 business categories.

Employers estimate the annual insurance premium for the current insurance year to be paid in advance, and then settle the account after the actual amount of wages is finalized. This process is called “The – annual renewal of labor insurance.” The – annual renewal of labor insurance must be completed between June 1st and July 10th every year. If delayed, there is a possibility that a surcharge of about 10% of the insurance premium may be imposed.(Ministry of Health, Labor and Welfare, “Labor Insurance System (Introduction and procedures guide)”)

4. This Week’s Words of Wisdom

“A man’s worth is no greater than the worth of his ambitions.” (Marcus Aurelius / Roman philosopher)

These words of wisdom are pregnant with implied meanings. I suppose that ones ambitions undergo age-related changes.

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

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