Do not panic before listing! Review the accounting practice and tax essence of a listing preparation company ipo-jyuku.


As soon as we aimed for an IPO, the relationship that had been left to the advisory tax accountant changed completely, and we had to firmly hold our own accounting and close the accounts in a short period of time. It requires a completely different accounting process from the previous “tax accounting”, such as provisions, impairment losses, and asset retirement obligations, which will have a negative impact on profits.
Regarding the timing of recording sales, it is possible that audit firms pointed wout that “the accounting period is too early”, and that profits will drop significantly, while profits will increase due to the application of tax effect accounting.
If the necessity of such accounting treatment becomes clear after the IPO preparation is started… In ipo-jyuku
this seminar, we will discuss the issues of financial instrument accounting, asset retirement obligations, impairment accounting, etc. We will tell you the essence of the accounting practice and taxation of the listing preparation company so as not to panic.

1. Financial accounting (corporate accounting) and tax accounting
Before aiming for listing, many companies prepare financial statements with tax accounting, but when it comes to listing, it is also called financial accounting or corporate accounting, but it is necessary to create financial statements with this financial accounting ..
First, let’s check the definition and purpose of what is financial accounting/tax accounting.

Financial accounting (corporate accounting):
Accounting that is mainly applied to listed companies.
It is created based on various accounting standards such as corporate accounting principles and is intended to be provided to investors and other interested parties of companies.

Tax accounting: Accounting
for calculating the amount of taxable income that should be taxed on a company.
It is created based on the corporate tax law and is intended to report to the national and local governments.

Since financial accounting is premised on investor protection, the idea is to take into account risks such as unexpected expenses and losses as soon as possible. On the other hand, tax accounting is an accounting that calculates income, which is the taxable amount, so there is a tendency that expenses (loss) will be recorded and income will increase (as a result, tax amount will increase).

Difference between tax accounting and financial accounting
▲The difference between tax accounting and financial accounting, and the purpose of preparation are different, which causes a difference in profit and income.

Looking at the difference between financial accounting and tax accounting a little more, there is a difference in handling related to expenditure items, especially expenses (loss), and specifically, regarding the recording of impairment, asset retirement obligations, various provisions, etc. , There is a big difference.

Differences between financial accounting and tax accounting
▲ There is a big difference between financial accounting and tax accounting, and the expenditure items.

2. I want one book for each company when aiming for an IPO, and there are six accounting audit methods that include accounting standards.
Do you know the Six Accounting Audit Laws?

The Accounting Auditor Law contains the accounting standards and application guidelines necessary for an IPO. Even if you just look at the table of contents, the accounting standards, etc. are recorded in a very large number and it is a very thick book. So, even as an accountant, I don’t have everything in mind. Of course, you don’t have to remember everything.

What is important is that if you encounter an event that requires you to actually consider the accounting process after understanding the outline (not the details) of accounting standards etc., you will be able to draw on these 6 methods of accounting audit, and become accustomed to drawing That is.
Please understand these six methods by grasping the outline, not the details, such as the accounting standards for the lecture this time.

By the way, there are some tips when looking at accounting standards.

Currently, the table of contents of “Accounting Standards Application Guidelines for Impairment of Fixed Assets” is displayed, but most accounting standards and application guidelines have rules, standards, etc. in the first half. Here, the “application guidelines” marked with ◎ is applicable.

Next, there is a “background of conclusion” with ◎. This “Background of Conclusion” describes how you adopted this rule. Therefore, even if you look at the rules in the first half and there is no description that fits exactly, there is a possibility that you can understand the idea by looking at this “background of the conclusion” and it may be a hint when considering accounting treatment. If you have any trouble, please take a look.
In addition, since many standards have “examples” after them, you can deepen your understanding of accounting standards, etc. by solving the “examples”.

Many accounting standards have this kind of structure, so please refer to it when you investigate.

3. Financial instrument accounting: Securities are valued by classification. Firmly understand the classification method
Now let’s look specifically at accounting standards that differ from tax accounting.

The first is financial product accounting.
Financial instrument accounting is a standard that defines the accounting treatment of monetary claims and debts such as accounts receivable and payable, securities, and derivatives. It stipulates when to recognize the occurrence and disappearance of financial assets and liabilities, when to turn it over, when to recognize the gain or loss on financial instruments, and what to do at the end of the period.

This time, we will explain the term-end valuation of securities that many companies will come up with in the accounting process.
If you hold securities such as stocks, you usually think that you have the purpose of holding them, but it is believed that the accounting treatment will change depending on the purpose of holding them. Therefore, in the evaluation at the end of the period, we first begin by classifying securities into the following four categories according to their holding purpose.

① Trading securities
② Bonds held to maturity
③ Stocks of subsidiaries and affiliates
④ Other securities

If a general business company holds securities of other listed companies for investment purposes, is this the trading securities of ①?
The answer is no. In order to be classified as trading securities, the following two requirements must be met.

(1) It is clear from the Articles of Incorporation that trading of securities is a business. (
2) Trading securities are stored and operated by an independent specialized department composed of trading staff and personnel who can perform daily business. Is desirable.

In other words, it does not apply unless it is held by a financial product company that specializes in investment, and it is quite limited, so even if it is for investment purpose, it is held by a general business company. In this case, the securities will not be trading securities.

In addition, as for held-to-maturity bonds, it is also conditioned that they must be held until the maturity date based on their willingness and ability, so this does not apply when there is a possibility of selling on the way and maturity It can be said that the cases applicable to holding purpose bonds are fairly limited.

Securities classification conditions
▲ Securities classification conditions, most of which are classified as “other securities” or “stocks of subsidiaries and affiliates”.

Here’s a question.
Q1: What is the most common classification in practice?
A1: “Other securities” or “stocks of subsidiaries and affiliates”. As mentioned above, the classification conditions other than these are quite limited.

Q2: Can the classification be changed if the purpose of holding changes?
A2: Not possible.
This is because the accounting process is determined by classification, and if it can be easily changed, the accounting process can also be easily changed. It cannot be changed without a good reason.