J-GAAP: Net Assets

On December 9, 2005, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Standard No. 5, Display of Net Assets on Statement of Financial Position.
That Standard defines that net assets is the excess of assets over liabilities, and is required to be displayed as a separate element on statement of financial position. It also specifies components of net assets, which include:

• Shareholders' equity;
• Remeasurement and translation adjustments;
• Minority interest; and
• Stock options.

It is a common understanding that distinction between liabilities and equity is very difficult, considering the current financial engineering. Definition of liabilities, which is a relatively clear concept, is used when identifying net assets. Therefore, items that are included in net assets but excluded from shareholders' equity are remeasurement and translation adjustments, minority interest, and stock options.
Shareholders equity is subdevided into the following categories:

• stated capital;
• capital surplus (additional paid-in capital);
• earned surplus (retained earnings); and
• treasury stock.

Remeasurement and translation adjustments include unrealized gains and losses on financial instruments, unrealized gains and losses on land that are allowed to be revalued by the Land Revaluation Law, and translation adjustment recorded when foreign-currency-denominated financial statements are translated into reporting currency. Those adjustments would be attributed to shareholders' interest, but they are considered as a separate component from shareholders' equity until they are released from risk (realized).