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1. Accounting (Recoverability of Deferred Tax Assets)

Application guideline of Accounting Standards Board No.26: “The Practical Solution on the Recoverability of Deferred Tax Assets” was applied from business years or consolidated business years starting on or after April 1st, 2016 in principle.

This Application guideline follows the basic concept of the Auditing Standard Board Report No. 66 of the JICPA: The Audit Treatment of Judgments with Regard to Recoverability of Deferred Tax Assets which is the existing guideline for judging the recoverability of deferred tax assets according to the classification of a company (divided into five classes).

However, this is revised in requirements and wordings as necessary. Therefore, considerations should be given to the effectiveness of this revision. Especially in companies classified into No.2 and No.3 categories, please note that “accounting ordinary profit and loss” worded in Report No. 66 as a criterion to requirements has been changed into the wording “taxable income in taxation”.

2. Tax(Outline of the 2016 Tax Reform Proposals – Documentation of transfer pricing taxation No.2)

In the 2017 Tax Reform, with the revision of the Mutual Agreement Procedure for tax treaties, the following domestic legislations will be developed.

i. Regarding Mutual Agreements Procedures(MAP), a resident of the other Contracting State may apply to petition for an MAP to the Commissioner of the National Tax Agency.

ii. Regarding a request for arbitration, the person who filed the petition for MAP to the competent authority in the other Contracting State may request an arbitration from the Commissioner of the National Tax Agency.

iii. A system of deferral of payment of tax related to a special provision for taxation on a transaction with foreign affiliated corporations should be established.

3. Labor Management(January 2017 – Results of supervision and guidance provided by the Labor Standards Inspection Office)

On January 17, 2017, the Ministry of Health, Labor and Welfare announced the results of supervision and guidance provided by the Labor Standards Inspection Office (LSIO) to 10,059 companies suspected of long work hours between April and September 2016. Out of the 10,059 companies, 6,659 companies were found in violation of labor standards-related law. The major violations included; illegal overtime work (43.9%), failure to take measures to prevent employees’ health problems due to overwork (10.4%), and unpaid overtime work (6.3%).

The LSIO provided guidance to 8,683 of the 10,059 companies to take measures to prevent employees’ health problems due to overwork, such as providing interviews by medical doctors to employees who worked long hours.

The 2016 inspection targeted companies suspected of having some employees work over 100 hours of overtime per month. However the 2017 inspection will widen this scope to target companies suspected of having some employees work over 80 hours of overtime per month. (Source: The Ministry of Health, Labor and Welfare press release)

4. This Week’s Words of Wisdom

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries.”(Winston Churchill)

That is precisely a problem that the U.S. and North Korea have.




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

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