Article 61-7Recording of Valuation Gain or Loss of Securities Not for Buying and Selling by Market Value Hedge Accounting

①In the case where a domestic corporation has conducted derivative transactions, etc. (meaning derivative transactions, etc. as prescribed in paragraph (4) of the preceding Article; hereinafter the same applies in this Article) so as to decrease the net operating loss that is likely to arise due to fluctuations in the value of its securities not for buying and selling (meaning securities not for buying and selling as prescribed in Article 61-3, paragraph (1), item (ii) (Inclusion of Valuation Gains or Losses on Securities for Buying and Selling in Gross Profits or Deductible Expenses); hereinafter the same applies in this Article) (such fluctuations exclude those arising due to fluctuations in foreign exchange rates in the value of the securities listed in Article 61-9, paragraph (1), item (ii), (b), which is to be converted into Japanese yen as prescribed in paragraph (1) of the following Article (hereinafter the amount converted into Japanese yen is referred to as the "amount in Japanese yen" in this paragraph) by the conversion method at the current exchange rate prescribed in Article 61-9, paragraph (1), item (i), (b) (Inclusion in Gross Profits or Deductible Expenses of Profits or Losses on the Difference from the Conversion of Assets in a Foreign Currency at the end of the period)) (hereinafter such net operating loss is referred to as the "net operating loss on hedged securities" in this Article), (limited to the case where the domestic corporation has stated, in books and documents, to the effect that the securities not for buying and selling are to be evaluated or converted into the amount in Japanese yen as specified by Cabinet Order, and has entered other matters as specified by Ministry of Finance Order as specified by Ministry of Finance Order; the same applies in the following paragraph), when the securities not for buying and selling have not been transferred during the period from the time of the derivative transactions, etc. to the end of a business year, and when it falls under the case specified by Cabinet Order as a case where the derivative transactions, etc. are deemed to be effective to decrease the net operating loss on hedged securities, the portion of the difference between the value and the book value of the securities not for buying and selling, which has been calculated, as specified by Cabinet Order, as the portion corresponding to the amount of profit or loss prescribed in paragraph (1) of the preceding Article that arises from the derivative transactions, etc. (referred to as the "valuation difference on hedged securities" in the following paragraph), is included in deductible expenses or gross profits, when calculating the amount of income for the business year.

③In the case where a domestic corporation has received, as a result of a qualified merger, etc., the transfer of a contract for derivative transactions, etc. that has been conducted so as to decrease the net operating loss on hedged securities from an acquired corporation, etc., and has received, as a result of the qualified merger, etc., the transfer of securities not for buying and selling (limited to those with which the net operating loss on hedged securities is to be decreased through the derivative transactions, etc.) (where an acquired corporation, etc. involved in the qualified merger, etc. subject to the provisions of paragraph (1) or the preceding paragraph had already settled derivative transactions, etc. that it had conducted so as to decrease the net operating loss on hedged securities prior to the qualified merger, etc., in the case where the domestic corporation has received, as a result of the qualified merger, etc., the transfer of securities not for buying and selling (limited to those with which the net operating loss on hedged securities is to be decreased through the derivative transactions, etc.) from the acquired corporation, etc.), when the acquired corporation, etc. has stated, in books and documents, to the effect prescribed in paragraph (1) and has entered other matters as prescribed in the paragraph, regarding the derivative transactions, etc. wherein the contract has been transferred (where the settlement had been made, the derivative transactions, etc. wherein the settlement had been made; hereinafter the same applies in this paragraph), as specified by Ministry of Finance Order as prescribed in the paragraph, with regard to the application of the provisions of this Article in each business year on or after the business year containing the date of the qualified merger, etc., it is deemed that the domestic corporation has conducted the derivative transactions and has made the entry so as to decrease the net operating loss on hedged securities pertaining to the securities not for buying and selling that it has received as a result of the qualified merger, etc.

④The disposition of the valuation difference on hedged securities prescribed in paragraph (1) in the following business year, and other necessary matters concerning the application of the provisions of the preceding three paragraphs are specified by Cabinet Order.