Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.21C h a i r m a n ’ s

4/ 28/ 2023

C o l u m n

How ChatGPT may change
Accounting Firms
With Covid mostly behind us, we’re seeing our clientsand stakeholders more in person. Recently, we visited
Singapore for a conference as a member of Prime
Global, a network of tax, accounting, and audit firms.
The event spanned three days and centered around
Asian practices. It included multiple sessions,presentations for new services, and successful casestudies. 91 members were in attendance.
Some of the challenges that accounting firms face weremutually shared regardless of country. They included a
range of topics such as preparing for labor shortages,inflation-adjusted fees, employee training, and carbon
accounting.
Among them was the topic of ChatGPT which mostspeakers mentioned without exception. How eachaccounting firm intends to engage with it varies, but as
the shortage for workers is becoming a reality, there’s
hope that ChatGPT will save accounting firms bydramatically boosting operational efficiency.

It’s been reported that some countries have banned theuse of ChatGPT, however I personally believe that thedevelopment of such revolutionary tools are useful insome capacity.
The one task that I can think of immediately is a more
efficient way of making journal entries. With further
advancement, it may not only make data entries, butalso review, analyze, and prepare draft reports.

To try it for myself, I made an OpenAI account and asked
the question, “How will business models of accounting
firms change with ChatGPT?”. I received a surprisingly
sufficient answer.
It’s just the beginning of this new era and theimplications are still unknown as the technology evolves.
As AI constantly learns and doesn’t forget information
like humans, I get the feeling that these machines willaffect both work and our entire livelihood.
Just as remote work and web-based meetings took off
during Covid, we will keep a close eye on this rapidly
advancing new technology.
by Kazuhiro Matsuzawa, Chairman

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Aoyama Sogo Accounting Firm

Innovation Speed QualityVol.21

D Xi n4/ 28/ 2023

A c c o u n t i n g

ASA’s Story of Digital Transformation
Part 2: Before undergoing DX
As we previously mentioned, we are working on ourSDG (Smart Data Guideway) plan as part of our DX.
In Vol.17, we discussed some of the challenges with DX.
This time, we discuss necessary preparations before
moving further.
As the commercial “Eat before you drink!” fordigestive medicine suggests, the idea is to havemeasures (to protect your stomach with digestive
medicine) in place for incidents that may occur in thefuture (Feeling stomach discomfort after a heavy meal).
With DX, prior preparations will likely be effective justthe same. Specifically, the aim is to eliminate the“reliance on individuals” as much as possible.
You may think this is obvious, but work related to realestate funds can often be reliant on a few individuals.
At accounting firms, there are a variety of formats foraccounting policies and PM reports, as well as different
reporting formats for AMs and investors. Because it’soften difficult to standardize these various processes,
there is a tendency to become reliant on a few
individuals. However, in developing systems, thereliance on specific individuals will result in higher
development costs and delays in completion.

Thus, in developing our system, we felt a strong need tosimultaneously do the following (ideally in advance):① Standardization② Rule-setting③ Consistent workflows

In providing various reports, rules can be made when
the same approach is used, or standard processes canbe decided on. By doing so, the reliance on
nontransparent procedures by individuals can beeliminated.
Our firm has emphasized standardization as animportant topic from three years ago, but in developing
our new system, an elevated level of rules andconsistent workflows will be needed. The above items
will likely contribute to operational efficiency as well.
The benefits for DX will likely mean greater productivity
for our firm.
We hope this discussion will be helpful in yourcompany’s DX as well.
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.21E m e r g i n gT r e n d sChanging Tides of Global Population

Looking globally, while China as the most populous
country is declining, India is on the rise, and is estimatedto surpass China as the world’s most populous country(estimated by the United Nations).

In general, a linear relationship typically exists
between working population and real estate value.
According to research results, the correlation is high inTokyo, particularly for residential properties.

Meanwhile, the population in African countries isgrowing rapidly. Since 1950, the population of theAfrican continent as a whole has increased by over 2%
annually. Currently the continent holds a similar-sized
population as that of China and India with 1.4 billion
people. Estimates suggest that by 2050, one in four
people will be African. Since we view the world on a
Mercator projection where north and south appear
larger, one may have an impression that the centrallymapped African continent is not as big as Europe or theAmericas. However, in reality, the continent is massive
and with a growing population, the region is sure to
become more significant in the future.

According to Mizuho Trust Bank’s “Real Estate Market
Report - April edition”, in Tokyo’s 23 wards, there were
net move-outs (minus 14,000 people) in 2021. In 2022,
there were net move-ins (plus 21,000 people). During
Covid, there were roughly 60,000 net move-outs, so athird has returned, perhaps implying a post-Covid shift.
For the hotel and foodservice industries, the number of
20 to 29-year-olds who make up the core workforce
have bounced back to pre-Covid levels.

Japan’s population has declined for 12 straight years,
with 2022 having a decrease of 560,000 compared tothe previous year. While the Japanese population
decreased by 750,000, the number of foreigners
increased by 190,000 for the first time in two years(reported by the Ministry of Internal Affairs andCommunications). Considering Fukui Prefecture’s
population is about 750,000, the Japanese aredisappearing by a similar amount every year!

Population ranking (2020)
RankCountry

1245

China
India
United States ofAmerica
Indonesia
Pakistan

678
910
113

4/ 28/ 2023

by Shigeru Hirai, Client Relations Group

Population % change ranking (2020)
Est. population(billion)
14.4
13.8Rank

Country

Increase (%)

12

NigerBahrain

3.8
3.6

3.3

3

Equatorial Guinea

3.4

2.7
2.2

45

3.3
3.2

Brazil2.1

6

Nigeria
Bangladesh
RussiaMexico
Japan

2.1
1.6
1.5
1.3
1.3

78910

UgandaAngolaDemocratic Republic ofthe Congo
BurundiMali
ChadTanzania
Japan

3.1
3.1
3.0
3.0
2.9
▲ 0.3

Source: Ministry of Foreign Affairs

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

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.21G l o b a l

R e a l4/ 28/ 2023

E s t a t e

Sweden’s use of wood for newbuilds

reforestation and proper management of timberland
ensures that resources are plentiful, and forests
continue to act as carbon sinks.

With the built environment accounting for nearly 40%
of carbon emissions every year, new constructions havea stronger focus on energy efficiency and carbon
reduction than ever. Sweden, with its rich history of
low-level wooden homes has transitioned into higher
level constructions.

In recent years, the 75-meter Sara Cultural Centre
built in Skelleftea, Sweden is symbolic of a burgeoning
timber construction scene. The mixed-use building isconstructed of cross-laminated timber and glued
laminated timber and claims to be carbon negative over
its lifecycle. The timber it uses was locally sourced andprocessed at a sawmill 30 km from the construction site.
The country has also focused heavily on green building
certifications, resulting in 6th in global rankings for LEED
certifications in 2022.

New builds are being demanded for an exploding ecommerce industry or for use as new city center, andthe focus is on carbon neutral builds. For Sweden,
timber has become a key material to achieve a carbon
neutrality or even carbon negativity during a building’s
full lifecycle (from materials manufacturing,transportation, construction, operation, and demolition).
Sweden is taking full advantage of this natural
resource, since the country has one of the highest
densities of forestland in the European Union. Timber isconsidered to store carbon during the tree’s growth andonly emits carbon dioxide during its reuse or ultimate
incineration. The Swedish Wood association claims that

Sweden is a great example of an early adopter thathas utilized its abundant natural resources in asustainable way. The people must demand it, and thepeople certainly have. Government-led initiatives havealso influenced action for true sustainability throughcarbon tax law implemented in 1991 and ideals ofcircular economy. Perhaps there are lessons here forother countries as well.
by Yuichi Totani, Client Relations GroupSara Cultural Centre (Photo: Jonas Westling)
Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.21J a p a nTa x

4/ 28/ 2023

U p d a t e

Requirements for bookkeeping
under the electronic record
retention system
The Electronic Record Retention Law which starts on
January 1, 2024, primarily consists of two separate rules
which are the “Preservation of accounting documents inelectronic format” and “Preservation requirement for
information regarding electronic transactions”.
The outline of the law was covered briefly in Vol.17 of
our newsletter, but this time we will explain in detailabout the electronic retention system for accounting,which is a crucial component.
【1】 Key point
Electronic accounting records are separated into “Bestpractice electronic accounting records” and Generalelectronic accounting records” with different
requirements for each. The latter has more simple
requirements.
【2】Requirements for Best practice electronic
accounting records① Manual for computer systems※ Having a system instruction manual available
will suffice.

② Placement of a readable device※ To put simply, a device such as a monitor andprinter to neatly/clearly display and promptly
output the data.
③ Be downloadable upon request※ If a tax audit occurs and a tax agent requires adownload of accounting data related to national tax.

④ History of revisions, deletions, and additions ofelectronic records※ Required that the fact and content of any
revisions or deletions of the recorded accounting
records can be verified. In addition, any entry
deletions made after the ordinary processing
period has elapsed should be verifiable.
⑤ Ensure interconnectedness of recorded items
across accounting records※To put simply, previously the general journal,
general ledger, and other accounting documents
were separately created documents. However, inmost cases now, there is one database for these
documents where interconnectedness is ensured.
In addition, the other accounting documents isdefined as all other accounting records prior to the2023 tax reform. The reform has limited the scopeof other accounting documents to the following:Notes receivable ledger, notes payable ledger,
accounts receivable ledger, accounts payableledger, securities journal, fixed asset register,deferred asset ledger, sales journal, purchasejournal, expense journal (excludes the salaryregister)⑥ Search function
・Search by transaction date, amount, and party ispossible.
・Search by range of date or amount is possible.
・Search with a combination of at least twoentered items is possible.
※In principle, the three requirements above areneeded to satisfy the search function requirement.
However, if ③ (download is available uponrequest) is satisfied, only the first requirement of“transaction date, amount, and party” is necessary.

(continued on next page)

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Aoyama Sogo Accounting Firm

Innovation Speed QualityVol.21
J a p a nTa x4/ 28/ 2023

U p d a t e【3】General electronic accounting records
requirement
As mentioned above in 【1】, the use of standard
accounting software should be ample to satisfy thisrequirement.

The following are the three requirements under thegeneral electronic accounting records.
① Manual for computer system② Placement of a readable device③ Comply to download requests
The requirements differ substantially between bestpractice and general electronic accounting records.
There are numerous hurdles to clear for the bestpractice electronic accounting records and may evennecessitate a change in accounting software. However,there are benefits under the best practice, such as alower underpayment penalty of 5% for any
underreported income tax, corporation tax, orconsumption tax on an amended return (the penalty is
10 to 15% under general accounting records.)
by Harutomo Yamasaki, Tax Consulting Group

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