Japan

1 Chapter Accounting

    • Accounting system

      ■ Outline of accounting system

      Japanese accounting is based on corporate accounting principles as "normative accounting practices that are generally accepted as fair and reasonable" and is formed by law in line with "fair accounting practices".

       

      【Relationship between Accounting and Law】

       

      A corporation that conducts business in Japan will conduct corporate accounting in accordance with the Company Law, the Financial Instruments and Exchange Act and the tax law if it is a general company.

      ①      Company Law

      The Company Law stipulates how to calculate dividend profits and accounting methods for the purpose of protecting shareholders and creditors. Under Article 431 to 465 of the Companies Act, we stipulate accounting methods, preparation and preservation of books of accounts, methods of recording the amount of capital and methods of calculating dividend profit for the purpose of protecting shareholders and creditors.

       

      ※図を作成して挿入

       

      ②      Financial Instruments and Exchange Act

      Under the Financial Instruments and Exchange Law, for the purpose of protecting investors, and targeting companies such as places where publishes public offerings or large companies which publishes and collects certain amount of valuable papers, and prepare a securities report or securities registration statement apart from the financial documents stipulated by the Companies Act, and then required to submit them to the Prime Minister.

       

      ③ Corporate tax law

      With the fairness of taxation as the basic principle, we stipulate how to calculate taxable income of corporations. When making tax payment to Japan, we have an obligation to prepare and submit a declaration in accordance with the tax law.

       

       

      Post period

      The accounting period of Japan is decided at the time of establishment, with arbitrary period as accounting period. The corporate tax year is decided according to the decided fiscal period.

      Accounting book

      Japanese companies are obliged to prepare accurate accounting books on a timely basis (Article 432 of the Companies Act) as required by the Ministry of Justice Ordinance

      The accounting book created has been preserved for at least 10 years from the time when the accounting period to prepare books is completed by the Companies Act (Article 432 (2) of the Companies Act)

      In Japan, when preparing an accounting book, we prepare "main book" and "auxiliary book" and make it according to accounting standard which is generally accepted as fair and reasonable.

      In addition, the accounting books and the calculation documents to be prepared are generally in accordance with the company calculation rules, the language is displayed in Japanese, and the currency is denominated in yen, and must be shown in yen unit, thousand yen unit or million yen unit (Article 57 of the Company Calculation Regulation and Article 57, Paragraph 2 of the Company Calculation Regulation)

    • Accounting standard

       Japan's accounting standards are set by the ASBJ Standards Committee (ASBJ). In terms of the characteristics of Japanese accounting standards, we will select criteria and methods of treatment that conform to the provisions of laws and regulations, such as the corporate accounting principles and corporate law, the Financial Instruments and Exchange Act, the Corporate Tax Law, etc., which we explained in the previous chapter. In recent years, amendment has been made to eliminate the difference with IFRS, which is a global standard.

       

      Introduction of IFRS

      Japan announced the "Tokyo agreement" to gradually resolve differences between Japanese standards and IFRS in 2007 and is still continuing the convergence of Japanese accounting standards and IFRS. The adoption of IFRS is now optional, and we can prepare consolidated financial statements based on the IFRS specified as designated international accounting standards from the Financial Services Agency for companies that meet certain qualifying conditions. Also, in June 2015, ASBJ announced the "modified international standard", and any application is permitted here as well.

      The optional application requirements of IFRS had to meet the following requirements.

      a) The company which tries to apply must be a listed company

      b) In the securities report, you need to make a statement concerning special efforts to secure the adequacy of the consolidated financial statements

      c) There needs to be an executive or employee with sufficient knowledge of IFRS, and also a system needs to be in place to prepare consolidated financial statements based on the standards

      d) Has to be engaged in international financing activities and/or business activities (having foreign subsidiaries with capital of 2 billion yen or more in foreign countries etc)

       

      In October 2013, arbitrary application requirements were greatly eased, and the requirements a) and b) above were abolished.

      Also, as for application period, it was only possible to apply arbitrarily from the end of the fiscal year or the first quarter, but this restriction has been abolished and now IFRS can be applied from each quarter.

       

      Disclosure system and disclosure practice

      ■ Outline of disclosure system

      Calculated documents prepared based on the accounting books are submitted and disclosed in accordance with the Companies Act and in the company with the Board of Directors, upon holding of the Ordinary General Meeting of Shareholders, the directors shall, in accordance with the provisions of the Ministry of Justice, Therefore, it is necessary to provide "financial documents and project reports approved by the Board of Directors" (Article 437 of the Companies Act)

      Also, if you are a company with corporate auditors or a company with an accounting auditor, you must provide one that has been audited by a corporate auditor, or that has received audits under Article 436, Paragraph 2 of the Companies Act, and documents and business reports (Article 438 of the Companies Act)

      Disclosure contents

      It is stipulated to prepare the financial statements and business reports generally prepared and presented to shareholders and the supplementary schedules thereof (Article 435 paragraph 2 of the Companies Act)

      · Calculation documents

      The financial statements refer to the balance sheet, income statement, statement of changes in shareholders' equity, and individual notes. If there are subsidiaries in the company, it is also possible to prepare consolidated financial statements. (Article 444 3 of the Companies Act)

      Consolidated financial statements refer to the consolidated balance sheets, consolidated income statement, consolidated statement of changes in consolidated shareholders' equity, and consolidated notes (Company Calculation Regulation Article 61 (1))

      The contents of the individual notes table are as follows. Depending on the type of company, the items to be described are distinguished (Article 98 of the company calculation rule)

       

      [Items listed in the individual notes table]

       

      Also, when creating the consolidated annotation note table, it is structured as below.

      　

      Items listed

      1

      Notes concerning going concern assumption

      2

      Notes concerning important matters that are the basis for preparing consolidated financial statements

      3

      Notes concerning changes in accounting policy

      4

      Notes concerning change in display method

      5

      Notes on Changes in Accounting Estimates

      6

      Notes concerning correction of error

      7

      Notes concerning consolidated balance sheet etc.

      8

      Notes on Consolidated Statement of Changes in Net Assets

      9

      Notes concerning financial instruments

      10

      Notes concerning rental real estate

      11

      Notes to per share information

      12

      Notes on significant subsequent events

      13

      Other notes

       

       

      ■ Flow of disclosure work (in case of private company)

      The flow after finishing the settlement, until we publish the financial statements and business reports to shareholders at the ordinary general meeting of shareholders will be as follows.

       

      (1) Submitting the calculation documents of the directors

      (2) Notice of Audit Report of Accounting Auditor

      (3) Notice of Audit Report of Board of Corporate Auditors

      (4) Approval of financial statements etc. by the Board of Directors

      (5) Dispatch of Convocation Notice of General Meeting of Shareholders

      (6) Ordinary General Meeting of Shareholders

      (7) Public notice of balance sheet

       

      Of these (2), (3) and (5), the deadline is set, and you need to consider these when formulating the schedule of the settlement of accounts.

      　

      　

      Calculating documents and supporting schedules

      Consolidated financial statements

      (2) Notice of Audit Report of Accounting Auditor

      　

      One of the latest days of the following (Regulation 130, Paragraph 1, Item 1).

      A) The day on which four weeks have passed since the date of receipt of all of the financial statements

      B) The day on which one week has passed since the date of receipt of the supporting schedule of the financial statements

      C) Date determined by agreement between specified director, specified auditor and accounting auditor

      The day after four weeks have passed since the date of receipt of all consolidated financial statements.

      On the day specified by agreement between the Specified Director, the Specified Corporate Auditor and the Accounting Auditor, that day (Article 130, Paragraph 1, Item 3 of the Regulations).

      (3) Notice of Audit Report of Board of Corporate Auditors

      　

      Whichever is later, whichever is later (day 132, paragraph 1, item 1)

      A) the day on which one week has passed since the date of receipt of the accounting audit report

      B) If there is a date determined by agreement between a specified director and a specified corporate auditor, that day

      From the date of receiving the accounting audit report, the day on which one week has elapsed

      If there is a date determined by agreement between a specific director and a specified corporate auditor, that day (Article 132, paragraph 1, item 2 of the regulations)

      (5) Dispatch of Convocation Notice of General Meeting of Shareholders

      Public company

      Up to two weeks before the day of shareholders meeting

      　

      Company not a public company

      · Up to one week before the date of the general meeting of shareholders

      · Companies who are supposed to exercise their voting rights by written or electromagnetic means two weeks ago

      · Companies other than companies with Board of Directors may be less than one week according to the articles of incorporation.

      　

       

      With regard to (7), companies submitting securities reports of listed companies, etc. are not obliged to give public notice due to disclosure by securities reports etc. until public notice (Company Law 440 4 Section)

      ■ Submission of securities report

      Publicly listed companies must prepare and submit securities reports to the Prime Minister (Article 24 of the Financial Instruments and Exchange Act)

      The domestic company is to be submitted within three months after the relevant business year, and foreign companies are required to submit within the period specified by Cabinet Order as necessary and appropriate for public interest or investor protection (Financial Instruments and Exchange Act No. 24 Article)

      The following items are required in the securities report.

       

      [Matters to be written in securities report]

      History of major management indicators, History, Contents of business, situation of affiliated companies, Outline of employees, Outline of business results, Situation of production, Orders and sales, Issues to be addressed, Risks of business, Important management issues Analysis of conditions of research and development activities, Research and development activities, Financial condition, Operating results and cash flow, Outline and status of capital investment etc., Plans for new establishment / removal of facilities, Status of stocks, etc., Acquisition of treasury stock etc. , Dividend policy, Trends in stock prices, The status of executives, The situation of corporate governance, Consolidated financial statements etc., Financial statements, etc.

    • Audit system

       ■ External audit system

      In Japan, there are two types of external audit system, “Financial Instruments and Exchange Act Audit” and “Company Law Audit”. Other legal audits such as private school promotion law audit, labor union law audit, political party assistance law audit, local government audit are institutionalized. These will be done by asking external experts such as audit corporations and certified public accountants.

       

      · Financial Instruments and Exchange Law Audit

      The Financial Instruments and Exchange Law Audit is defined by Article 193-2 of the Financial Instruments and Exchange Act of Japan. The audit of financial statements (accounting audit) is stipulated in paragraph 1 and the internal control audit is stipulated in paragraph 2.

      For financial statement audit, companies that are listed companies such as securities reports, listed companies, companies that issue over-the-counter registered shares, companies that submit securities registration statements, and companies that have 500 or more shareholders (and with a capital of 500 million yen or more) becomes the coverage and an opinion of the appropriateness of consolidated financial statements and financial statements is given by the accounting auditor.

      Internal control audit also covers the scope of coverage of listed companies and over-the-counter stock issuing companies, and concerning the appropriateness of the results of evaluating the effectiveness of internal control over financial reporting by the company itself (internal control evaluation report) An opinion of the accounting auditor will be made.

      These financial statement audits and internal control audits are often carried out as one unit from the viewpoint of efficiency.

       

      · Company Law Audit

      The Corporate Law Audit is defined by Article 436, Paragraph 2, Item 1 of the Companies Act but unlike the Financial Instruments and Exchange Law audit, internal control audit is not covered by the scope of the audit.

      Auditing of accounting documents (accounting audit) prescribed by the Corporate Law Audit covers the large company under the Companies Act (companies with capital of 500 million yen or more or total liabilities totaling 20 billion yen or more) covered in the scope of coverage, and the consolidated financial statements And the opinion expressed by the accounting auditor regarding the appropriateness of the financial statements and the supplementary schedules thereof

       

      Internal audit system

      Internal audits as a system have audits by the corporate auditors and audits by the audit committee members.

      Corporate auditors 'audits are conducted by corporate auditors at companies with auditors, and not only accounting audits but business audits are conducted to confirm the legality of directors' performance of their duties. Regarding accounting audits, when accounting audits are conducted by external experts (auditors) such as audit corporations, accounting audits by corporate auditors are used to judge the method of auditing by the accounting auditor or the reasonableness of the results You can stay. If we admit that these are not appropriate, we will also implement accounting audits on our own.

      The audit by the Audit Committee is conducted by the Audit Committee at a company with committees etc. The system is almost the same as the audit by the corporate auditors as a system.