1. Taxation (Source: “Zeimutsushin Magazine”)
“Free rent” is becoming common practice for office lease contracts in Japan as well. Tax treatment of the lessor in the case of a free rent contract is as follows:
1) When the lease is non-cancelable.
Total rent amount should be spread equally over the entire lease period (including the free rent period) and the lessor will report such equal amounts as taxable income for each business year.
2) When the lease is cancelable on condition that the lessee will pay a fee equivalent to three months of rent
In this case, rent to be paid upon termination of the lease is considered tantamount to penalty charges. Accordingly, the lessor will not need to report any income during the free rent period and money received at time of cancellation will be included in taxable income upon receipt of such amounts.
2. Accounting (Source: “Keieizaimu Magazine”)
The IASB currently requires companies to use market yields on high quality corporate bonds at fiscal year-end when calculating the discount rate for employee benefits. In cases where a deep corporate bond market does not exist, companies are required to use the market yield on government bonds instead but the IASB is recently proposing to eliminate the exceptional use of government bond yields.
In practice, the ASBJ will very likely follow IASB’s position in this proposal and require the use of high quality corporate bond yields instead of government bond yields.
３．This Week’s Words of Wisdom
“How can a small bird like a swallow or a sparrow understand the aspirations of a large bird like a stork or a swan? Only a hero can understand a hero.” (Chen Sheng)
This saying by Cheng Sheng reminds me of Chinese classics lessons that I took in high school. Chen Sheng is one of the leaders of the “Chen Sheng and Wu Guang’s Revolt (209 B.C.)” which triggered the collapse of the Qin Empire. This saying means that an ordinary person cannot understand the ambitions of a great person.
With a nice ring to the ears, I believe this saying is often cited even now although I have forgotten the source of it.