ASBJ 27 Accounting Standard for Current Income Taxes

ASBJ has recently (2026) issued a revision to this Statement. The core historical framework described below is well-established, but the precise substance of the most recent revision should be verified against ASBJ's current published materials.

Current Standard

ASBJ Statement No. 27 (Revised 2026) – Accounting Standard for Current Income Taxes

Conceptual Framework Linkage

Recognising the current period's tax liability across multiple layered taxes

ASBJ Statement No. 27 governs the RECOGNITION of "CURRENT" income tax expense – the amount of tax PAYABLE (or refundable) for the CURRENT period, based on TAXABLE profit – DISTINCT from the DEFERRED tax accounting addressed by ASBJ Statement No. 28. A DISTINCTIVE feature of Japan's system is that "income taxes," in the ACCOUNTING sense, actually comprise SEVERAL separate, layered NATIONAL and LOCAL taxes.

Scope – Japan's Layered National and Local Tax System

All companies subject to Japan's corporate tax regime

This Statement applies to ALL companies subject to Japan's CORPORATE tax system, which – DISTINCTIVELY – layers NATIONAL corporation tax TOGETHER with LOCAL inhabitant tax and enterprise tax, EACH governed by its OWN tax rules but TOGETHER treated as "income taxes" for ACCOUNTING purposes.

Corporation Tax, Inhabitant Tax, and Enterprise Tax

Three distinct taxes, together forming Japan's "income tax" accounting concept

Tax Description

Corporation tax (法人税)The primary NATIONAL tax on corporate taxable income

Inhabitant tax (住民税)LOCAL (prefectural/municipal) tax, generally calculated with reference to corporation tax liability and a per-capita component

Enterprise tax (事業税)LOCAL (prefectural) tax, with BOTH an income-based component AND, for larger companies, a size-based ("pro forma standard") component (Section 4)

THE KEY NUANCE – the Size-Based Portion of Enterprise Tax

A genuinely distinctive Japan-specific classification question

For LARGER companies, enterprise tax includes a "PRO FORMA STANDARD TAXATION" (外形標準課税) component – calculated based on FACTORS such as VALUE ADDED and CAPITAL, RATHER than purely on taxable INCOME. This raises a genuinely DISTINCTIVE classification question: since this portion is NOT fundamentally based on the entity's INCOME, is it truly an "income tax" for accounting purposes? Under J-GAAP practice, the INCOME-BASED portion of enterprise tax IS treated as CURRENT TAX EXPENSE (within the "Corporation, Inhabitant, and Enterprise Taxes" line), while the SIZE-BASED (pro forma standard) portion is generally treated as an ORDINARY OPERATING EXPENSE (within SG&A) INSTEAD – a NUANCED classification distinction WITHOUT a close IFRS or US GAAP parallel, since NEITHER framework has an EQUIVALENT tax construct of this SPECIFIC type.

Recognition Timing for Current Tax Expense

Recognised in the period the related taxable income arises

CURRENT tax expense is recognised in the SAME period as the TAXABLE income (or loss) it relates to – with a CORRESPONDING current tax LIABILITY (or receivable, for tax refunds due) recognised on the Balance Sheet, REGARDLESS of when the actual tax PAYMENT is due.

Worked Example – Classifying Enterprise Tax Between Income-Based and Size-Based Portions

Splitting the tax charge by nature

Example: A large company's enterprise tax liability

A large company's total enterprise tax for the year is ¥45,000,000, comprising ¥30,000,000 based on taxable income and ¥15,000,000 based on the pro forma standard (value added and capital) factors.

The ¥30,000,000 INCOME-BASED portion is classified as CURRENT TAX EXPENSE (within the income tax line). The ¥15,000,000 SIZE-BASED portion is classified as an OPERATING EXPENSE WITHIN SG&A – NOT as part of income tax expense – reflecting that it is NOT fundamentally based on the company's income.

Worked Example – Total Current Tax Expense

Combining all three layered taxes

Example: Combining corporation, inhabitant, and income-based enterprise tax

A company's corporation tax is ¥200,000,000, inhabitant tax is ¥25,000,000, and the income-based portion of enterprise tax is ¥30,000,000.

TOTAL CURRENT TAX EXPENSE = ¥200,000,000 + ¥25,000,000 + ¥30,000,000 = ¥255,000,000 – presented TOGETHER as a SINGLE "Corporation, Inhabitant, and Enterprise Taxes" line in the Statement of Income.

Disclosure Requirements

What ASBJ Statement No. 27 requires

Current tax expense recognised, and its components across the layered tax system Basis for classifying the size-based enterprise tax portion as an operating expense

Critical Judgments & Estimates

Where judgement matters most

SIGNIFICANT JUDGEMENTS

Correctly splitting enterprise tax between its income-based and size-based components

SIGNIFICANT ESTIMATES

Estimated current tax liability where the final tax return has not yet been filed

Relationship to IAS/IFRS and US GAAP

A genuinely distinctive Japan-specific tax structure

IAS 12 and ASC 740 BOTH address "income taxes" as taxes based SUBSTANTIALLY on TAXABLE profit – NEITHER framework has an EQUIVALENT concept to Japan's LAYERED national/local tax system, OR the SPECIFIC classification question raised by a SIZE-BASED (non-income) enterprise tax component. This makes ASBJ Statement No. 27's Section 4 classification NUANCE a GENUINELY DISTINCTIVE, Japan-SPECIFIC feature, rather than a divergence from a SPECIFIC IFRS/US GAAP treatment of the SAME underlying transaction type.

Statement Mapping

Where every current tax event lands

Event Statement(s) affected Notes

Income-based current taxBS P&LPresented as income tax expense

Size-based enterprise taxBS P&LPresented as an operating expense, not income tax

Related Standards

Cross-reference map

Standard Connection

ASBJ Statement No. 28Tax Effect Accounting – supplies the DEFERRED tax counterpart to this Statement's CURRENT tax treatment

Quick-Reference Glossary

Pro forma standard taxation (外形標準課税)

The size-based component of enterprise tax applicable to larger companies, calculated based on value added and capital rather than income.

Enterprise tax (事業税)

A local prefectural tax comprising an income-based component (treated as income tax expense) and, for larger companies, a size-based component (treated as an operating expense).

Financial statement key (Japan GAAP terminology)

BS Balance Sheet (貸借対照表) P&L Statement of Income / Profit and Loss Statement (損益計算書) Net Assets 純資産の部 SCNA Statement of Changes in Net Assets (株主資本等変動計算書) SCF Statement of Cash Flows (キャッシュ・フロー計算書)