Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.17 11/ 30/ 2022

C h a i r m a n ’ s

C o l u m n

The growing interest for
Non-Financial Disclosures
As of the time of this writing, the United Nations
Climate Change Conference (COP27) is under way. The
primary objective is to exchange ideas on how eachcountry will attempt to meet their emissions reduction
targets to halt the rising average global temperature byjust 1.5 degrees Celsius.
Since ASA supports the administration of real estate
and renewable energy funds, the disclosures areprimarily about financial figures and cashflow. However,particularly in today’s investing climate, we feel thegrowing importance of ESG calculations and disclosures.
ESG bonds and social bonds are becoming moreprevalent as products that can potentially reduce
financing costs by meeting certain criteria.
At COP27, I have heard that one of the key topics is
how to calculate GHG emissions. Last month, a client
had asked, “Does Aoyama Sogo Accounting provide
services for CO2 emissions calculation?”. I am verymuch interested in this field and in speaking to globalfund administrators, they have begun such services.

At center: COP27 President Sameh Shoukry on November 18, 2022
(Source: Reuters)

The exact definition is still unclear, but it seems to becalled “carbon accounting”. Although calledaccounting, it has less to do with financial statements.
In providing such services, we must first become more
knowledgeable about the international standards ofthe GHG Protocol for emissions calculation andreporting, particularly for Scope 3 emissions. Needlessto say, this may be challenging...
by Kazuhiro Matsuzawa, Chairman

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.17 11/ 30/ 2022

D Xi nA c c o u n t i n g

ASA’s story of digital transformation
Part 1: Team Building
As previously mentioned, we are moving forward with
our SDG (Smart Data Guideway) plan as part of ourdigital transformation.
The DX of accounting is becoming more commonplacein numerous ways. For example, accounting systems
especially after Covid have dramatically become
automated by way of syncing payment and bookkeeping,
and automatic text recognition of PDF files like invoices.
Such efficiency gains in our accounting system are just
one solution to cut down on time, however, since ourfirm deals with SPC administration, this alone provesineffective.

To elaborate, when servicing SPCs, it’s not justbookkeeping but also includes TK reports, financialstatements, business reports, as well as utilizing data forinvestor reports and cash flow preparation. Afterconsidering such needs, we concluded that a separate
system needed to be developed.
We have previously used VBA and RPA on a projectbasis as part of our overall system development,
however it was implemented in limited capacity formenial tasks and proved difficult to expand into a bigger
platform. When we started our DX initiatives,
employees with systems experience were involved.
However, to create a revolutionary platform, we foundthat we were short on time and technical knowledge.

We have added several system engineers who will bededicated to developing a new system. We havealready seen a dramatic improvement in development
speed, system accuracy, and speed. However, thechallenge for engineers is that they lack accounting andSPC-related knowledge. It’s up to us to tell theengineers what final product we would like to see.
We are still undergoing much trial and error, and toreach a solution, both teams need to understand eachother’s work better and establish a common language.
As DX progresses throughout SPC-related industries,
we hope our case study proves to be helpful. We willcontinue this dialogue in the next volume.
by Hirokazu Ando, ASA Reporting Professional

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.17 11/ 30/ 2022

R e a lE s t a t e

REITs and Green Bonds – Why now?

How can REITs benefit from issuing green bonds?
According to the Green Finance Portal, issuing green
bonds has the following benefits:① The advancement of sustainable management
practices through green bond related initiatives anddialogue with investors.

② Strengthening fund-raising efforts by acquiring newinvestors and consistent fund-raising through ESG
dialogue with investors③ Public recognition for proactiveness in green
projects④ Possibly more advantageous conditions for fundraising

Currently, nearly 80% of Japan’s public REITs issue
green bonds, signaling perhaps a new standard for theREIT industry.

What exactly is a green bond?
The Ministry of Environment’s “Green Finance Portal”(https://greenfinanceportal.env.go.jp/) gives thefollowing explanation:“Issued by companies and local governments to fundraise for domestic and overseas green projects”

These are just some potential benefits. However, forREITs, it seems that the biggest incentive is to cater toinvestors who are far keener about ESG than in previousyears.
When issuing green bonds, some additional work isrequired which includes maintaining certifications for
qualified green assets and periodic reporting. But alongwith GRESB, green bonds are certainly another way for
REITs to contribute to ESG initiatives.
by Shigeru Hirai, Client Relations Group① Use of funds is restricted to green projects.
② Funds raised are adequately tracked and managed.
③ It is a highly transparent form of security throughperiodic reporting after issuance.
For businesses, the ① “Green project” conditions may
be difficult to meet, however for REITs, green projects
are defined as,“the financing or refinancing for the purpose ofacquisition or renovation/construction of qualifying
green assets (defined for each REIT by a third-party
certification body that uses certification ranks)”
The definition is fairly simple and standardized across REITs.

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.17 11/ 30/ 2022

N e w

T r e n d s[PropTech] Japan to begin using
Real Estate IDs

Specifically, the following can be considered benefits ofa real estate ID system.
• Simplifying the process of finding and matching dataof the same property within a company system, or
between a company system and information
obtained from external sources.
• Filtering out redundant property listings and bait
advertising.
• Reducing data entry by reusing past transactionaldata.
• Improving accuracy of appraisals through awarenessof final sales prices• Assessing repairs and maintenance history alongwith residential history.

The new real estate ID guideline has been released
from Japan’s MLIT (Ministry of Land, Infrastructure,Transport and Tourism) .
The real estate ID is a 13-digit real estate number and4-digit special code that is unique to each property. Thissystem is available for everyone. Additionally, thespecial code is used to determine a particular businessuse floor or residential room.
Currently in Japan, the lack of a real estate ID number
makes the process of obtaining and using real estate
information difficult, since addresses are sometimes notconsistent. When businesses independently gather
property information or when releasing accurate
information to consumers, the lack of an ID proves
burdensome and time-consuming. These are just someof the challenges in how property information is relayed,accumulated, and used.

• Combining property management with infrastructure
data like electricity, gas, and water.
• Reducing the burden of conducting surveys andpreparing key information guidelines throughcollaboration with city planning information, hazard
maps, etc.
• Creating new real estate services by utilizing big datafrom diverse areas for high-precision AI appraisals
and other uses.

Hopefully there will be more advantages, once IDs
start to be used. Contrarily, there are challenges of how
to reduce data entry errors to produce accurate
viewable information, as well as whether transactions oftrust beneficiary interests can be saved as useable data.
It will be interesting to see how this system will develop
over time.
by Masanori Ikematsu, ASA Advisory

By creating a real estate ID system, such problems will
be resolved, and hopefully the industry will improve its
productivity and be more convenient for consumers.
There is also hope that the system will help propel thedigital transformation of the real estate industry byproviding a robust database.

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.17 11/ 30/ 2022
J a p a nTa x

U p d a t e

Data retention requirements forElectronic transactions
For most businesses, preparing for next October’s“qualified invoice system of consumption tax (retentionof qualified invoices)” will likely continue to be an
immediate concern. However, a bit further away
starting on June 1, 2024, the “data retention
requirement for electronic transactions” takes full effect.
I would like to summarize some of the key points of theretention requirements.
(1) Firstly, the retention requirement applies to“everyone” that abides by electronic bookpreservation requirements for income tax andcorporate tax. This includes not only companies but
also the smallest sole proprietors.
(2) Electronic transactions include all purchase orders,invoices, purchase receipts, contracts, fee quotes,
and delivery notices (both documents sent andreceived).

(3) Electronic transactions include all transmissions thatoccur over electromagnetic systems. This includes
all EDI transactions, transactions over the internet,and attachment files sent/received via electronic
mail. A famous example is if an employee pays for acompany’s necessary business item (to bereimbursed) on his/her smartphone, thattransaction qualifies as an electronic transactionthat must be saved as electronic data.

(4) Retention requires verifiability (to prevent
falsification) and searchability (date, party, amount).
For example, emails should not just be saved on acomputer but must meet such requirements.
Depending on the business, this data retention
requirement for electronic transactions can potentiallybe more cumbersome than complying with the invoicesystem for consumption tax. Thus, we ask that you
prepare early to be in full compliance.
by Masaaki Kidokoro, Tax Consulting Group

From the Editorial Department
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