1. Accounting (Source:“Keiei Zaimu Magazine”)
As part of the 2011 tax reforms that took effect on June 22, the “direct reducing method” for inventory valuation has been abolished. However, according to the “Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9), both the “indirect reducing method” (*1) and the “direct reducing method” (*2) can still be used to account for inventory valuation despite the recent tax reforms. When using the “direct reducing method” to account for inventory valuation, it will however be necessary to make adjustments to the final tax return.
Please also note that companies that currently use the “direct reducing method” for their accounting policy cannot simply switch such policy because of the recent tax reforms. Rather, the company must also have some rational reason to make the change. Furthermore, the company should consider whether it will be possible to apply the alternative method retrospectively in the practice of business, since retrospective application has been required for fiscal terms ending March 2012 according to the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24).
(*1) indirect reducing method: indirectly reducing reported inventory through the use of a contra inventory adjustment account
(*2) direct reducing method: directly reducing the inventory account by the amount that market is below cost
2. Taxation (Source:“Zeimu Tsushin Magazine”)
Expenses that were paid to foreign workers and their families after the Great East Japan Earthquake to allow them to urgently depart Japan for their home countries are not considered wage in kind. The reason the expenses cannot be deemed wage in kind is that such short-term trips are deemed to be an emergency evacuation based on the company’s need to continue the execution of its business.
Accordingly, withholding tax is not required to be withheld from this leaving expense as a salary. This treatment differs from the so-called “home-leave treatment”, under which travel expenses a company bears for foreign workers are exempted from tax under certain conditions.
Furthermore, considering that several months have now passed since the occurrence of the earthquake and no substantial new information has been provided concerning radioactivity in the country, it is difficult to regard on-going leave as an emergency evacuation. And since the leave expenses cannot be deemed wage in kind, these expenses must be taxed unless it corresponds to the above conditions of “home-leave treatment”-even should such workers have been sent to their home countries by business orders.
3. This Week’s Words of Wisdom (Edited from: NHK “GIFT － The World of Famous E-Quotes－“
“Don’t limit a child to your own learning, for he was born in another time.”
（a Jewish proverb）
I can understand this proverb well. Now my daughter is trying her hardest to prepare for university entrance exams, and I unconsciously tend to recommend to her study methods that were popular when I was in the same situation. These days, however, the National Exams and the contents of the subjects are quite different from those of my time, so I imagine she must be pretty annoyed with my comments.
－Jun Nagamine