1. Accounting(Trends in accounting standards for financial instruments (Part3))
According to the current Japanese accounting standards, a receivable is required to be reported on the balance sheet with an acquisition cost or amortized cost less an allowance for bad debt.
Also, an allowance for bad debt is required to be reported in accordance with credit classifications (normal receivables, doubtful receivables and uncollectible receivables and others) according to the circumstances of a debtor.
In future, actual practices can be impacted by the change of assessment of receivables under new accounting standards since in terms of consistency with the IFRS. Expected credit losses are required to be measured based on whether the credit risk of each receivable is remarkably increased or not after initial measurement. Furthermore, a company needs to set up a database for credit risks for each receivable and new procedure are necessary to keep such data into its database and its system may be revised.
The outline of Tax Revisions in 2019 was released on December 14th, 2019. From this magazine, we would like to share the outline of the revisions related to international taxation.
Part 1 Maintenance for intangible asset in accordance with transfer pricing taxation.
1. The definition of intangible assets in scope of transfer pricing taxation will be clarified.
2. Discount Cash Flow method (the DCF method) is applied for arm’s-length price measurement regarding intangible asset transactions whose comparable transaction cannot be specified in accordance with the OECD Transfer Pricing Guidelines. At the same time, the DCF method is added into arm’s-length price measurement in case of presumptive assessments by the National Tax Agency.
In the last mail magazine, we described the People’s Republic of China is not included in the group of countries who automatically exchange Country-by-Country Reporting. However, according to the National Tax Agency announcement on November 21st, 2018, China is included in this group. However, one of the conditions for this automatic exchange is that an agreement regarding the information treatment is agreed to, we will describe details as they become available.
3. Labor Management (January 2019: Employers’ obligation to designate period of employees’ annual paid leave)
In principle, an employer must grant annual paid leave for a particular period requested by a worker. However, the rate of workers taking annual paid leave still remains low today. In order to encourage workers to take annual paid leave, the relevant laws were amended recently. Effective from April 2019, all employers will be obliged to let the eligible workers take at least 5 days of annual paid leave per year by designating the period.
Key points of this obligation:
1. The eligible workers are limited to those who are entitled to at least 10 days of annual paid leave (including Supervisors).
2. Employers are obliged to let the workers take at least 5 days of annual paid leave within 1 year from the date that each leave is granted.
3. This rule does not apply to workers who already took 5 or more days of annual paid leave within 1 year from the date that each leave is granted.（Resource: “Employers’ obligation to designate period of employees’ annual paid leave”, the Ministry of Health, Labor and Welfare）
4. This Month’s Words of Wisdom
Trust is to be beloved of people, keep a promise and make people rich.
(Soichiro Honda founder of Honda Motor Co., Ltd.)
I recently learned that Soichiro Honda was a founder of Ashinaga Ojisan which is a famous Japanese Scholarship Fund.One of conditions of being a founder was anonymity.He was revealed as a founder a long time after his death.
For more details, please refer to Nagamine & Mishima JC Accounting K.K.