1. Accounting (Source: “Keiei Zaimu Magazine”)
On March 26th, 2013, the Financial Services Agency released the “Opinion on the Standard Setting to Address Risks of Fraud in an Audit (hereinafter referred to as the “Opinion”)”.
Triggered by some fraudulent accounting incidents conducted by Olympus and other companies, the standard has been set with the intention of clarifying the auditing process of financial statements to cope with risks of material misrepresentation conducted with the intention to commit fraud.
It is explicitly expressed in the Opinion to add factors which the company doesn’t anticipate (including audit without prior notice, a so-called surprise audit) to the amended audit schedule, in a case in which there is any suspicion of intentional material misrepresentation, depending on the situation.
The scope of application of the new standard is going to be limited mainly to listed companies and will be in effect from the audit of financial statements reflecting the results of the fiscal period ending March, 2014.
2. Taxation (Source: “Zeimu Tsushin Magazine” )
The Tokyo High Court affirmed the judgment that an LPS established in Delaware, USA, was a “corporation” under the Japanese tax code (March 13th, 2013).
(The following is a writer’s opinion on the judgment) The High Court apparently thinks a strict standard regarding whether or not an entity is defined as a corporation should be applied in this case, and there is no room to consider processes under the US tax code because an LPS is originally established as an entity within a corporate body. Even in a case of selecting pass-through taxation by using the check-the-box regulation, this selection itself is also based on the fact that the LPS has the nature of a corporation (I have not yet referred to the latest decision).
It’s very reasonable indeed to strictly apply the interpretation of the Japanese laws as such, but, taking into consideration that the LPS scheme was originally created for the purpose of providing tax merits, it seems to me that the question is whether or not it is feasible to keep the country closed to some extent in a legal aspect in this borderless economy where investors can have access to a multitude of investments all over the world. In other words, it appears to me this is an issue of business or politics rather than of law.
As money travels all around the world in a moment, it is the current global trend to relax legislative regulations on international monetary transactions.
Therefore, I’m concerned that we may be facing the risk of rendering economic activities stagnant if these transactions are blocked by legal judgments made on the basis of a country’s law.
3. Labor Management(Working Hours during Business Trips Abroad)
In principle, employers are obliged to keep track of employees’ working hours each day.
However, how should an employer calculate the hours worked by an employee when it is difficult to ascertain the actual hours worked, especially when the employee is abroad on a business trip?
< Calculation of hours worked >
When it is difficult for an employer to keep track of an employee’s working hours while he/she is abroad on a business trip, “De facto working hours system outside workplace” may be applied for the calculation of hours worked.
*De facto working hours system outside workplace (Labor Standards Law, Article 38-2) “In cases where workers perform their work outside of the workplace during all or part of their working hours and it would be difficult to calculate working hours, the number of hours worked shall be deemed to be the prescribed working hours.”
An employee is deemed to have worked his/her regular working hours only when it is difficult to calculate the actual hours worked. Therefore, in cases where a supervisor is accompanying the employee on a trip and is therefore able to ascertain said employee’s working hours, the hours worked must be calculated based on the actual number of hours worked according to the principle. Employers need to consider each time whether “it is difficult to calculate the hours worked” prior to making the actual calculation.
< Issues concerning working hours during business trips abroad > When there is a time difference between Japan and a host country, the dilemma is which country’s time zone and date designation should be used for the calculation of the employee’s working hours. If working hours are calculated in the host country’s time zone, sometimes one day may appear longer than 24 hours, or the calculation could show more than 7 days in a week. On the other hand, if working hours are calculated according to Japan time, daytime work in the host country may be considered as nighttime work in Japan, which could result in a problem.
At the moment, there is no written regulation or administrative interpretation to address this issue.
Therefore, labor and management should decide upon mutual agreement which country’s time zone and calendar is to be used for the calculation of hours worked during business trips abroad as long as it does not conflict with the principle of the Labor Standards Law.
In order to preclude any misunderstandings or conflicts between employees and employers, it is recommended that the latter establish rules for business trips abroad and clearly specify how to calculate hours worked during such trips.
For more information, please contact our HR Consulting Group.