1. Accounting (Source: “Keiei Zaimu Magazine”)
The “Accounting Standards for Accounting Changes and Error Corrections” (ASBJ Statement No. 24) applies to fiscal years starting on or after April 1, 2011. More specifically, quarterly reports for the period from April 1 to June 30, 2011 are the first ones that are required to disclose accounting policy changes made within the period. In practice, there are many examples where such changes in accounting policies are disclosed with the introduction of new accounting standards such as the “Accounting Standards for Earnings per Share”, while there are much fewer cases where companies make voluntary changes and retrospective application to accounting policy. Moreover, in some cases, retrospective application is not made at all since the accounting policy changes are viewed as having a very small impact.
Specific examples of the revised accounting policy include a move from reporting on a gross basis to a net basis of sales and a change in the method for inventory valuation.
2. Taxation (Source: “Zeimu Tsushin Magazine”)
Under the OECD Model Tax Convention, executive compensation is to be taxed in principle based on a corporation’s primary country of residence since it is difficult to identify exactly where executives are performing their duties. Under the Japanese Income Tax Law however, a Japanese resident who is an officer of a foreign corporation shall be subject to double taxation since Japan source income includes income for working overseas. Under the US-Japan Tax Treaty, a foreign tax credit can be claimed by means of the deemed income provision for avoidance of double taxation.
As certain bilateral tax treaties concluded by Japan do not include a provision for deemed income, there are certain situations where double taxation occurs. With the introduction of the 2011 Tax Reforms, this has now changed and it is prescribed that income which is subject to double taxation can be deemed foreign income (Income Tax Act 224-4-3). As a result, foreign tax credit can apply to the deemed foreign income and double taxation be avoided completely.
3. This Week’s Words of Wisdom (Source unidentified)
“In the factories we make perfume, but in the stores we sell hope.” (Revlon Cosmetics)
This statement makes a lot of sense to me. Cosmetics and jewelries bring us dreams. We cannot compute the selling price by the cost. Businesses should focus on selling the WANT-the hope.