Author Archive
Greeting for a new year
TweetAsia Pacific, Europe and Africa will be celebrating a new year soon.
I am now in the US and we have one more day here.
Our office is 24/7 available even remotely. Please feel free to contact us.
I would like to express my thank to the readers of this blog, and those whom I have been in touch with.
This year we have encountered major natural disasters such as New Zealand earth quake, Japan earth quakes and Tsunami, and Thailand flood, and also economic and politic major changes such as strong yen, European crisis, and North Korea leadership change.
May the new year be happy to all of you.
Batch size and Fallacy of composition
TweetI receive many Advertising mails in weekends.
Also I receive many questionaire emails and advertising emails.
Car dealers, retailers and furnishing dealers may want us to visit in weekends.
Other questionaire or advertising emails are meant to be read in weekends when people are not busy.
This concept itself is right.
However, the reader’s time is limited.
Everybody has 24 hours a day, and does not spend all day to read mails.
The time to read mails should be limited.
Someone wants to spend his/her time for hobby and together with his/her family rather than reading mails.
Then amount of unread mails can be discarded.
A sender tends to send mails in weekends when people may have much time to read.
However everyone does do the same action, amount of mails are delivered at once and discarded unread.
This controversial situation is called “Fallacy of composition”.
The way to be paid attention more in that situation is to take other actions than others.
You may send mails in another day while other send in weekends.
Your mail can be read more while a reader has no other many advertising mails.
There is a theory called TOC, or Theory of constraints.
The theory is for optimizing output with resolving a bottle neck if there is a constrain, or a bottle nect in a sequential model.
One of ways to resolve a bottle neck is to minimize a batch size.
It may help a model to be flexible when a bottle neck has less capacity.
In my case the bottle neck is the limited time to read advertising mails.
Amount of advertising mails mean a large batch size flows to a reader.
To minimize a batch size, or sending advertising mails in a day other mails are not sent, may resolve a bottle neck.
How to turn arround the Japanese economy (vol.1)
TweetI visited Roppongi Hills, one of popular business complexes in Japan.
I was working there a few years ago, and it brings me the memories.
I went to a restaurant I used to go for lunch at that time and found it was already closed.
I saw some restaurants and stores are closed.
I also concern some stores in my neighborhood have been closed.
I don’t think this is not all of Japanese economy and some fields are still growing, but I am afraid various aspects are deteriorating and collapsing in Japanese economy.
When architecture collapses, even though the collapse is very small at the beginning, the surroundings cannot support and they collapse, then the outer surroundings collapse and other.
It is a chain reaction.
The closing restaurants and stores remind me the same chain reaction in Japanese economy.
When offices are closed due to the business downsizing, office workers become less. The less demand makes restaurants and stores close. Then their operators have to downsize, and the demand is more reduced.
I don’t want be too pessimistic, and want to consider how we are able to stop it and turn it around.
ROE of Japanese companies recovered
TweetAccording to Nikkei, a financial news paper, reported on July 3rd that an average ROE of Japanese listed companies recovered to 6.0% as of March 31, 2011, which is 2.1% better than the last fiscal year.
However an average ROE of US and European companies reaches over 10%.
It has been spoken that ROE of Japanese companies has been low.
I see two following aspects for the reason.
One is the high corporate tax rate.
The effective corporate tax rate in Japan is around 40%. US’s one is similar, but Europeans’ are around 30%.
Therefore the ROEs before tax are:
Japan ROE=6.0%/(1-40%)=10%
European ROE=10%/(1-30%)=14%
Although Europeans are higher, but Japanese comes close.
If Japanese gains as Europeans do, ROE has to be 10%/(1-40%)=16.7%, which is much higher.
Japanese industries’ leaders complain the government how high the tax rate is, and the calculation above realizes how high.
The other aspect I assume is pricing.
Many US and European companies with strong brands earn high margins.
Louis Vuitton or Mercedes may earn a lot of margins.
In the other hand, SONY, Panasonic, or Toyota is also a global brand but they do not earn high margins.
The variance of margins may lead to the variance of ROEs.
The value strategies of Japanese companies are not wrong.
It has been told that Japanese products have reasonable prices and good qualities. The lower margins of Japanese companies are realize by such low prices.
In the value strategies of Japanese companies, the values are not gained by capitals through ROE but by customers.
Capitals seem losing the values to be earned, but gaining the sustainable growth through the customer loyalty with low margins.
Toru Ishihara won the 3rd prize at 2011 ICF canoe free style
TweetWe support Toru Ishihara, representing squirt kayaking in Japan.
He attended to 2011 ICF Canoe Free style Worldcup Championship and won the third prize. Congratulations!
Minister for Financial Services announced mandatory application of IFRS delayed
TweetOn June 21st, Minister for Financial Services Shozaburo Jimi spoke that Mandatory application should not take place from the business year ending March 2015, at the very least, and a sufficient time period of five to seven years should be required for preparation if and after mandatory application is decided.
This means that the mandatory application should be no earlier than March 2016 ending with five to seven years preparation even if it is decided to within next few months.
Some of the reasons are the delay of convergence project and the outbreak of the unprecedented Great East Japan Earthquake and tsunami.
There should be many aspects to be considered for IFRS application and can be cost-involved. It can be practically difficult for mandatory application from 2015 considering the effect of the earthquake.
However I believe the application can be delayed but never cancelled if we review the situation Japan faces in the global circumstances.
Mostly economic industries raise objections for IFRS application. In fact IFRS is much different in some aspects which may bring a company’s economic conditions.
The Japanese accounting standards now become much closer to IFRS than they used to be. The change approaching to the global standard can be made even though mandatory application would be questioned.
The matter does not change the reality of a company whether IFRS is applied or not.
An accounting principle is just a measurement to measure the financial status of a company.
Some Japanese have objections for market principle, but the values and risks of assets or liabilities may not be distinguished even though market principle would not be applied.
Differences between accounting principles may have theoritical or caltural backgrounds the societies have, but it is necessary to be measured with the same standard on the same page in such circumstances where a company is related to the world in many aspects.
The other concern to me is ‘Japan passing’ which has already come up before the great earthquake.
Japan can never exist without international relationships because it has few natural resources and the domestic market has become matured.
In such a circumstance the fact may limit the future activities of companies that Japanese financial statements are prepared with unique accounting standards.
Some Japanese say it is not appropriate to enforece IFRS to a company who may not raise funds from international capital markets.
However all companies raise funds from someone else, and they may have funds from other ones, then ultimately from all over the world.
If Japan would stay on the unique accounting standards, captails may leave who avoids Japan, which may reduce even domestic capitals.
I want to believe the comment of the Minister of Financial Services just meant the realictic response to the effects of the earthquake and just the delay of the application.
I hope they continue considering internationalization of Japan otherwise Japan will be left behind the global trend.
Have you already had a successor in finance?
TweetThe season comes that a finance/accounting personnel transfers.
Some of you have already received your subordinate’s resignation.
Have you already had his/her successor?
In Japan it is allowed to leave with one month notice according to an employment rule.
However, it is not easy to find his/her successor just after you have received his/her resignation.
Your business will stop if you would not have his/her successor.
Yoda Accounting Office provides you a support service to fulfill the vacancy of your resigning subordinates.
The roles we provide are;
1. Interim CFO, interim controller, or interim finance manager
2. Closing month-end or year-end, reporting to the management, the regional office or the head quarter
3. Budgeting and planning, analysis of the management report and forecasting
4. Analyzing the variance between the plan and the actual, management report and audit.
5. Daily transactions, accounting entries and also cash management including daily monitoring as a treasury.
6. other finance/accounting ad-hoc tasks
We will provide you a flexible service with a full-time service or a part-time service.
Please refer thedetails of this service.
Please feel free to contact us through the contact page.
A document to understand easily (1)
TweetA season for finance/accounting to move comes in Japan.
A fiscal year of most of Japanese companies end in March. Then May or June, after the closing in March, is the good time to change jobs.
A job change means your role is taken over by someone else, or you take over someone’s role.
You are happy if you have your successor to take over you, or you have the predecessor you take over.
However you may retire before your successor joins, or your predecessor may have already left when you join.
You may have to do your job by your own based on documents your predecessor left if your predecessor has already left.
In Japan, sometimes job descriptions are not always clear, or roles and responsibilities are not always clearly defined.
Some works may be highly dependent on individuals and not documented enough.
I have seen the following situation when I joined without my predecessor remaining.
1. Paper documentations
1-1. It is unknown where the documents are stored.
1-2. Document list of carton box archive is not organized (e.g. just written “xx documents”) and you have to open all documents to see what are stored.
1-3. A formulas is unknown and it is hard to know what items are calculated to a certain figure in a spreadsheet.
1-4. It is unknown where the file is when you see a printed document.
2. PC files
2-1. Folders are not organized or structured systematically, it is unknown where a certain document in a certain period is stored (e.g. “Annual” and “annual” folder may be found)
2-2. Many similar files are found and it is hard to know which is the latest. (a file is saved later than the “final” file)
2-3. A source is not described and it is unknown how the figure is retrieved.
2-4. Assumptions are unknown for a budget or a forecast.
The conditions above may bring a successor troubles.
I have some skills to dig out documents, to analyze how the document is created, or to find a ‘missing-ring”.
However it is the best to avoid such troubles above.
I will describe how to avoid next time.
次回は、このような苦労を防ぐための方法についてご説明したいと思います。
Another “souteigai” or outside of immagination – who bears the cost?
TweetIt has been told that The Tokyo Electric Power Company (TEPCO) assumed that the tsunami damage was outside of imagination for its Fukushima Nuclear Power Station #1.
Today we do not discuss about it was right or not, but we may see there was another “outside of imagination” for this matter.
It was not clear who would bear the cost in case of this kind of accidents.
TEPCO is now considered to take the primary responsibility, but could have the exemption according to the Atomic Energy Damage Compensation Law. However the condition of the exemption was not clearly defined and many discussions are made how to deal with the law.
This can happen not only in nuclear power station accidents but also in daily business contracts. However most of typical Japanese contracts do not define detailed clauses but just describe “in case of matters that this contract does not define, the both parties may deal with such matters with discussions faithfully”.
Essentially this means a matter outside of imagination will be discussed when happened.
Nobody wants to bear costs over his/her responsibilities. In case of the matters “outside of imagination”, many various arguments may incur who will bear the cost, and the time goes by without any conclusions.
The absence of the conclusion may affect on the cost estimation in financial closing.
Generally a provision has to be recognized when the cost will incur probably and the amount can be estimated rationally. However it cannot be estimated if the conclusion is not made who bears the cost.
It may trouble accountants.
When you make a contract, it would be better to define many matters without easily leaving as “outside of imagination”, and you may avoid useless arguments and may be able to respond financial actions.
Accountants may have to prepare for such cases with “imagination” as day-to-day business.
Hoarding and Supply Chain
TweetYoda Accounting Office extends its deepest condolences to all those affected by earthquake, especially those who have lost loved ones.
After the quake, many people rushed to hoard up goods at stores even though they were not directly affected by the quake. They were afraid the goods would have disappeared due to the quake.
Mr. Furuya Bunta commented this issue referring to Supply Chain management in his Twitter (in Japanese). He was a former CFO at a central core company at Coca-Cola supply chain management project in Japan a few years ago.
Mr. Furuya kindly agreed to copy his tweets on our website.
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Consumers have an ultimate power to control the supply chain. That is what I realized when I saw the hoarding issue and the saving power supply after the quake.
Consumers explicitly give stress on suppliers to increase production when they hoard stocks up, or they can save power supply enough to avoid the outage eventually.
Literally consumers are the king.
You may think the suppliers make amount of money when they increase their productions to fulfill the short stock after hoarding. However the reality is different.
They have to increase overtimes, run inefficient equipment, and transport materials far away, which increases their costs.
Such costs should be absorbed if the sales also increase. However, the hoarding does not increase the consumption at the end.
The hoarded goods are piled up as “stock” at consumers backyard. The consumers themselves may know soon.
They may save buying goods when they realize they piled up their stocks. By when?
Until the exceeded stocks = hoarded stocks will go out. Therefore, the production increase now is just a cannibalization of the future production. The total sales will be same at the end.
Total sales are same and costs increase more. This is the reason suppliers may fail after hoarding. Other headache is that the suppliers who increase productions for hoarding may have to dispose or discount their stock excess in the future.
Many suppliers calculate the necessary stock level and decide how many they have to produce or purchase. This is the cause of their headache, because they have to increase production or purchase more than they are requested when the demands hike.
When they catch up the demand increasing the production, the purchase decreases. Stocks at stores and warehouses slow down and the obsolete risk increases.
The suppliers may have to discount, or dispose after the UBD (used-before-dates) expire.
Hoarding is not the benefit for anyone else as a total social welfare. But the consumers are the king. It is not easy for suppliers to change their mind set.
We have one solution to change their mind.
Increase prices when the hoarding happens. It may be considered as preying consumers weakness, but it is more practical if you consider the total social cost.
Imagine you are in a long cue to wait for filling gas when the gas is short. At your turn, you may want to fill up full if the price is as usual. But what if the price is +30%? You may save and just fill as you need for the present.
This is how to control hoarding even though the gas station does not limit your maximum charge.
As discussed above, the hoarding may increase the total costs. To absorb the cost, the price increase is necessary.
The price increase is the way to show consumers how much the total social costs are and let them decide.
SCM is more than we see.