A company’s method of estimating inventory is decided by declaring the method to the tax office. Consult with your tax accountant first before submitting the form. It is usually submitted with the establishment notification as soon as the company is registered. Valuation loss is rarely allowed in the Japanese taxation system except being affected by disasters. The tax code clearly states that the following events are not subject to valuation loss.
1. Price Fluctuation
2. Excess Production
3. Change of Retail Price
Besides products, materials such as wrapping materials, office supplies and catalogs are subject to inventory count in principle. But by meeting certain standards, expenses can be recognized at once without recognizing inventory. Consult with your tax accountant whether your circumstance apply.