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February featured business affairs

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1. Accounting (Addressing negative interest issue)

The ASBJ has been addressing the accounting issue relating to the current state of negative interest. They have been discussing how to treat a discount rate that is used for the calculation of retirement benefit obligations and whether a special treatment for an interest-rate swap will be applicable.

Regarding the discount rate for the calculation of retirement benefit obligations, a negative rate was adopted by 39 corporations and a rate of zero was adopted by 151 corporations as disclosed in the notes of financial statements in their securities reports as of March 2016.Given the schedule towards a year-end closing of corporations for the fiscal year ending March 31, the ASBJ is considering announcing an exposure draft as soon as possible and moving forward with its examination so that a conclusion can be reached by March 2017.

2. Tax

On November 14th, the tax commission has released a report titled “A summary of the studies on how international taxation should function based on the recommendations by the BEPS project.” This summary of the studies advocates reforming the domestic taxation rules taken into consideration of the final reports of the OECD/BEPS project; as for the transfer pricing taxation of all others, it advocates tax reforms on intangible asset valuation satisfying the recommendations by the BEPS Action Plan, such as to use the discounted cash flow (DCF) method in cases where it is difficult to find a comparable transaction, to adopt commensurate with income standards under which an arm’s length price shall be recomputed ex-post facto if there are differences beyond a certain level between the anticipated benefits and the actual benefits on the hard-to-value intangibles, etc. However, whether these valuation methods will be introduced immediately in next year’s tax reforms is unclear at present (as of December 1st). From next issue, this section will cover topics connected to next year’s tax reforms.

3. Labor Management(36 Agreement)

The Labor Standards Act stipulates that an employer must not have workers work more than 40 hours per week and 8 hours per day. In order for an employer to have workers work legal overtime exceeding those hours (“overtime work”), a written agreement (known as the “36 Agreement”) must be signed between the labor and management and filed with the local Labor Standards Inspection Office in advance.

The 36 Agreement provides the “standards for the limit of working hours”, which is 45 hours per month and 360 hours per year for ordinary workers. Employers may have workers work longer than those hours by entering into the “36 Agreement with Special Provisions” with the workers, only when special circumstances that temporarily require overtime work beyond those limited hours are expected.Since the 36 Agreement is valid for 1 year, employers need to renew the agreement and file it every year if there is a constant need for overtime work.

4. This Week’s Words of Wisdom

“Like the cherry blossom, the heart planning on tomorrow is ephemeral indeed –what sudden storm may not arise in the middle of the night.”(Shinran)

Turning the sense of these words into profit, I am trying to do what I want to do whenever I feel like it, whether it is work or play.

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

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