ASBJ 40
Partial Amendments to Accounting Standard for Tax Effect Accounting
Partial Amendments to Accounting Standard for Tax Effect Accounting is part of the Japan GAAP framework.
Recency Note (October 2025)
RECENCY NOTE: Issued October 16, 2025 alongside ASBJ Statement No. 37, 38, and 39 – details should be cross-checked against ASBJ's current published materials.
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Conceptual Framework Linkage
Refining deferred tax mechanics for interim reporting purposes
ASBJ Statement No. 40 is the SECOND stage ("Part 2") of PARTIAL amendments to Japan's TAX EFFECT ACCOUNTING standard (ASBJ Statement No. 28 – see the companion poster), issued as PART of the SAME coordinated October 2025 package that PRODUCED ASBJ Statement No. 37 (Interim Financial Reporting). Given this COORDINATION, this amendment PLAUSIBLY addresses HOW deferred tax should be estimated and applied SPECIFICALLY within the CONDENSED, time-pressured context of INTERIM reporting.
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Scope – Interim-Period Deferred Tax Mechanics
Companies preparing interim financial statements with tax effect accounting implications
This Statement applies to companies APPLYING tax effect accounting (deferred tax, per ASBJ Statement No. 28) WITHIN the context of PREPARING interim financial statements under ASBJ Statement No. 37 – addressing PRACTICAL questions that arise when a FULL, year-end-style deferred tax analysis is NOT practicable within the SHORTER, condensed interim reporting timeframe.
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Why "Part 2" – Continuing the Tax Effect Accounting Reform Sequence
A recurring ASBJ pattern of incremental, sequential amendment
CONSISTENT with the SAME broader ASBJ PATTERN of incremental, staged standard refinement (ALSO seen in the retirement benefits reform and the "Part 3" cash flow statement amendments – ASBJ Statement No. 39), this "Part 2" designation REFLECTS a CONTINUING sequence of amendments to the UNDERLYING tax effect accounting standard, RATHER than a single, comprehensive rewrite.
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Estimating an Effective Tax Rate for Interim Periods
A practical simplification for interim-period tax provisions
A COMMON approach for INTERIM-period income tax accounting – used INTERNATIONALLY under IAS 34 and broadly PARALLELED in J-GAAP practice – involves ESTIMATING an ANNUAL EFFECTIVE tax rate (based on FULL-YEAR projected results) and APPLYING that estimated rate to the INTERIM period's own pre-tax profit, RATHER than performing a FULL, discrete deferred tax computation for the SHORTER interim period ALONE. This Statement's amendments PLAUSIBLY refine or CLARIFY this practical approach, GIVEN its coordination with the BROADER interim reporting reform.
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Coordination With the Interim Reporting Reform Package
A companion piece within the broader reform package
This Statement was issued ON THE SAME DATE as ASBJ Statement No. 37 (Interim Financial Reporting), No. 38 (consolidated interim preparation), and No. 39 (consolidated cash flow statement amendments) – CONFIRMING that TAX EFFECT accounting for INTERIM purposes was a SPECIFIC, deliberate focus of this COORDINATED reform effort.
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Worked Example – Applying an Estimated Annual Effective Tax Rate at Interim
A practical simplification for the condensed interim period
Example: Estimating interim tax expense using a projected annual rate
A company estimates its FULL-YEAR effective tax rate at 32%, based on projected annual results. Interim (half-year) pre-tax profit is ¥400,000,000.
The company recognises INTERIM tax expense of ¥400,000,000 × 32% = ¥128,000,000 – APPLYING the ESTIMATED annual effective rate to the interim period's OWN pre-tax profit, a PRACTICAL simplification AVOIDING the need for a FULL, discrete deferred tax computation WITHIN the condensed interim reporting timeframe.
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Disclosure Requirements
What ASBJ Statement No. 40 addresses
Basis for the estimated annual effective tax rate applied at the interim reporting date Significant changes in the estimated effective tax rate since the last annual report
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether the estimated annual effective tax rate approach is appropriate given the company's specific circumstances
SIGNIFICANT ESTIMATES
Projected full-year taxable income and effective tax rate
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Relationship to IAS/IFRS
Comparison – J-GAAP vs IAS 34's Interim Tax Approach
IAS 34 EXPLICITLY REQUIRES the estimated ANNUAL effective tax rate approach for interim tax provisions internationally – this Statement's LIKELY refinement of the SAME practical approach for J-GAAP purposes would represent a GENUINELY CONVERGED treatment, CONSISTENT with how J-GAAP's general interim reporting principles have ALREADY been broadly ALIGNED with IAS 34 (see the companion ASBJ Statement No. 37 poster).
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Statement Mapping
Where every interim tax event lands
Event Statement(s) affected Notes
Interim tax expense BS P&L Based on the estimated annual effective tax rate
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Related Standards
Cross-reference map
Standard Connection
ASBJ Statement No. 28 Tax Effect Accounting – the underlying base standard this Statement partially amends
ASBJ Statement No. 37 The general interim reporting framework issued as part of the same coordinated reform package
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Quick-Reference Glossary
Estimated annual effective tax rate
A projected full-year effective tax rate applied to interim-period pre-tax profit as a practical simplification, avoiding a full discrete deferred tax computation each interim period.
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)