48. Inventory Valuation and Historical Cost in Japan 棚卸資産の評価と取得価額

棚卸資産の評価と取得価額について英語でまとめました。
The table below provides an overview of inventory valuation and historical cost of inventory for Japanese corporate tax purposes.

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Japanese Corporate Tax Law provides for inventory valuation and historical cost of inventory as shown in the table below. 

Definition of inventory	Merchandise, products, semi-finished products, work-in-progress, raw materials and certain other assets of which an inventory has to be taken excluding commodities for trading or securities
Valuation method	Value ending inventory using any of the following methods: 1. Cost methods  (1)  Specific identification method (2)  First-in, first-out method (3)  Weighted average method (4)  Moving average method (5)  Last purchase price method (6)  Retail inventory method 2. Lower-of-cost-or-market method
Selection of method	A method for each business and each type of inventory.
Reporting of method	Notify the selected method(s) in writing to the tax office by the filing due date of the final tax return for the fiscal year of establishment.
Mandatory selection	If no method is selected or the selected method is not used, the last purchase price method is applied
Change of method	File a change application before the beginning of the fiscal year of the change with the tax office to seek approval.  Approval is deemed to be granted on the end of the fiscal year of change application if no decision is notified by that date.
Definition of historical cost (original cost)	Historical cost means as follows: Inventory type   General definition Purchased = Purchase price + Costs directly required to make the asset available for use or sale Internally manufactured Cost of materials Labor cost Expenditures Exchanged or gifted Value generally required to acquire the asset
Adjustment of cost	Valuation gain included in taxable income Cost of inventory = Original cost + Valuation gain Valuation loss allowed as a deductible expense Cost of inventory = Original cost – Valuation loss

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