Accounting regulations, accounting practice, and Japanese taxes are some of the accounting issues included for outsourcing clients in the HTM Knowledge Base.

Fixed Asset Accounting

Japanese tax regulations for accounting for fixed assets and the Japanese 2007 depreciation tax reform.

Employee Expense System

HTM's web-based bilingual outsourcing employee expense system, a system for recording employee expenses and advances, including instructions and accounting reports, relevant tax regulations regarding expensing, and allowable deductions of expenses.

Manufacturing System Requirements

Requirements for setting up an accounting system for a manufacturing company, including inventory and WIP management, costing, and valuation.

Overview of Japanese Taxes

Japanese national and local taxes, including corporate and individual taxes, and accounting rules.

Tax Return Filing

Accounting and documentation requirements for Japanese tax returns.
More on Japanese Tax Return Filing

 

Accounting Standards Requirements

Generally accepted accounting principle (GAAP) requirements of Japanese subsidiaries.
More on Accounting Standards Requirements

Source Documents

Original source documents must be available in Japan for tax audits.

Required Documentation

The following items must be attached to the tax return when filing:

• Detailed account schedule for each balance sheet account
• Equity movements
• Cash and bank balances
• Directors' compensation
• Rent paid during the year
• Contributions
• Miscellaneous income and expenses

Other Supporting Documentation

The following items are required for preparation of the tax return:

• Withholding tax on interest
• Other taxes and licenses paid
• Large and Small assets
• Dividends received
• Offices by prefecture
• Headcount
• Corporate tax payment status

Consumption Tax Reports

Consumption tax-paying companies must provide detailed reports of both consumption tax received and consumption tax paid, which must agree with the balance sheet.

Entertainment Expenses

Entertainment expenses must be booked in the accounts separately from other expenses, such as travel expenses, as entertainment expenses are not deductible expenses under under Japan tax law.

Inventory Accounting

Inventory methods applied in the accounts must conform to Japanese permitted inventory accounting methods.

 

 

The accounting regulations of a Japanese office commonly differ from that of the home office, requiring adjustments to the accounting records of both companies. To make those adjustments, detailed knowledge of Japanese generally accepted accounting principles (GAAP) and those of the home office--such as US GAAP or International Financial Reporting Standards (IFRS)--are required. Accounting areas needing consideration include the following.

Accounting for Income Taxes

Defined by FAS 109; IAS 12. Timing differences of items in the financial statements may arise from differences in accounting standards between a Japanese office and its home office, affecting accounting for income taxes.

Accounting for Compensated Absences

Defined by FAS 43; IAS 19. Accruals for compensated absences are not required in Japan, but may be required under US GAAP and IFRS.

Accounting for the Impairment or Disposal of Long-lived Assets

Defined by FAS 144; IAS 36. The accounting treatment for impairment or disposal of long-lived assets differs between Japanese GAAP, US GAAP, and IFRS.

Inventory Cost

Defined by FAS 151, IAS 2. The last-in first-out (LIFO) method of inventory accounting is permitted under US GAAP but not under IFRS. Under Japanese GAAP, LIFO is permitted until fiscal years starting April 2010.

Goodwill and Other Intangible Assets

Defined by FAS 142; IAS 38. Goodwill must be amortized according to Japanese GAAP, but not under US GAAP or IFRS.

Foreign Currency Translation

Defined by FAS 52, IAS 21. Exchange rates used for transactions, inter-group balances, and assets and liabilities may differ between a Japanese office and the home office, requiring careful reconciliation.

 

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