1. Accounting (Source: Keiei Zaimu Magazine)
Among three-hundred and ninety-six companies of the Nikkei 500 companies (as of July 2012) that prepare consolidated financial statements with a closing date of March 31, thirty-seven of them (9.3%) changed their closing date. Under Japanese accounting standards, two kinds of adjustment methods are permitted to adjust profit and loss caused by change of closing date – adjustment of retained earnings (B/S item) or adjustment through consolidated P/L statement. For example, if a company changed its settlement date from December 31 to March 31, its profit and loss during the 3 months from January to March of year X2 out of the 15 months from January of year X1 to March of year X2, could be adjusted in the consolidated balance sheet or in the consolidated profit and loss statement. Twenty-eight companies (76%) out of the 37 mentioned above adjusted through this latter method. The main reason for their choice was to simplify their administrative procedures of financial closing.
2. Taxation (Source: “Zeimu Tsushin Magazine”)
(1) The Nagoya High Court has ruled on the case of whether or not a Limited Partnership (LPS) founded in Delaware, USA met the defining criteria of a “corporation” as set forth in the tax law and the loss from real estate that the LPS incurred could be offset against the income of each member of the LPS.
A number of points were disputed in the case but the court judged that a “corporation” should be defined based on the Governing Law, and that loss from real estate could be offset against each member’s income beyond his/her investment.
This case is pending in the court of Tokyo, Osaka, and Nagoya. As the ruling was split, the following appeal in the Tokyo High Court and the Osaka High Court is drawing attention.
(2) In the past, the location of stocks and bonds has been judged according to the place of the head office of the stock- or bond-issuing company, and if this was in a foreign country, the stocks and bonds were considered overseas property. In the Tax System Revision of FY2013, it is noted that the location of stocks and bonds should be judged by the place of business, etc. of the financial institution managing the account. According to this revision, even foreign stocks or foreign bonds would be properties in Japan if the place of business, etc. (including branch offices of foreign financial houses) of the securities house managing the account were located in Japan.
Thus, if a foreign investment trust was purchased through the Internet and the head office of a foreign financial institution managed its account, it would be a foreign property.
3. Labor Management(Japan’s International Social Security Agreements)
(1). What is International Social Security Agreement?
As internationalization has progressed, many Japanese workers are being sent to foreign countries, just as many foreign workers are being sent to Japan. As a result, two issues have arisen concerning social security systems – the issues of “dual coverage” and “losing social security contributions”. In order to resolve these issues, International Social Security Agreements have been signed between many different countries.
The following are applicable cases when Japanese workers are dispatched overseas:
A) Issue of “dual coverage”
Employees and employers are required to join their host country’s social security system while simultaneously covered by the Japanese social security system. This results in a dual burden of social security contributions for both Japan and the host country.
B) Issue of “losing social security contributions”
Even if a person has paid into their host country’s social security system, he/she may not be able to receive pension benefits in that country if the duration of residence is not long enough for eligibility; as a result, those contributions are, for all intents and purposes, lost.
(2). Basic ideas of International Social Security Agreement
A) Elimination of dual coverage
In principle, individuals who come and go between two countries such as expatriates are required to join the host country’s social security system according to the principle of territoriality. However, when workers are sent to countries under this international agreement on a temporary basis, they will continue to be covered by the Japanese system as an exceptional treatment, taking into account the fact that their business relationship with their Japanese employers will continue and their assignment durations are expected to be temporary.
If duration of assignment in Agreement Country is expected to be:
Not more than 5 years → Covered under Japanese system
Exceeding 5 years → Covered under host country’s system
B) Totalization of coverage period
If a person’s coverage period in an agreement country is insufficient to receive pension benefits in that country, the person’s coverage period in Japan is deemed as a coverage period in that country, effectively combining them so the person loses no coverage. (There are some exceptions depending on the agreement.)
However, this does not mean that a person’s pension benefits will be calculated and paid by one country based on the totaled coverage period. Instead, each country respectively calculates the pension benefit in proportion to the coverage period under each country’s system and pays it separately.
*”Totalization of coverage period” under International Social Security Agreement is for Japan and the agreement countries to mutually combine a person’s coverage periods so that the person is eligible for pension benefits. Therefore, the period for which a person receives a Lump-sum Withdrawal Payment will be excluded from the coverage period under International Social Security Agreement.
The agreements vary depending on the countries. For more details, please contact our HR Consulting Group.
4. This Week’s Words of Wisdom (Source: Knowledge of Words of Wisdom, Knowledge of Life)
“Youth is not a time of life; it is a state of mind. (…) Nobody grows old merely by a number of years. We grow old by deserting our ideals. (…) You are as young as your hope, as old as your despair.”
I attended a seminar organized by Iwao Nakatani, the well-known 70-year-old economist, for one year. Because of the passion from the chairperson, the seminar abounded with energy and life and it was definitely worthwhile. Kenichi Ohmae, Management Consultant, also aged 70, appears on a live TV program and provides thought-provoking news analysis for 2 hours every Sunday.
In an aging society, to pursue a definite goal would be the key to fulfilling the rest of one’s life.