Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

C h a i r m a n ’ s

Vol.302024.2.29

C o l u m n

Emerging participants in the Private
Equity Market
Hello everyone. This month marks our 30th volumeof ASA Newsletter. As part of our renewal, we added
the subtitle “the latest in alternative investments”. Theterm may be unfamiliar to much of the public but asfund administrators, we know alternative assets as realestate, renewable energy, and financial assets that
don’t have a real-time market price.
As investment types have expanded in Japan, the termis becoming more commonplace. These assets are
typically held by companies and partnerships, andbeneficiary interests held by funds. Since our employees
are closest to the action, they can deliver the latest
alternative trends and discussion, challenges ofstructure setup, and sharing positive feedback fromindustry participants.
2024 began with sad news of the Noto Peninsula
earthquake. We send our deepest condolences to thoseaffected by the tragedy.
Meanwhile in financial news, the Nikkei StockAverage has been strong with a 35-year high withinreach. Some companies have risen in stock price whileothers have gone private. Some recent examples of thelatter are the respective TOB of Benesse and Lawson.
Since many of our clients are well-equipped funds withenormous capital and know-how, they can accelerate
growth in multiple companies that are beyond theirearly/seed stage. We deal with fewer buy-out funds (i.e.
those that invest with equity in mature companies).

A limited partnership is often used for setting up fundstructures within Japan. When a foreign entity is aninvestor, an LPS in the Cayman Islands may be used,which often results in more complexity. When a thirdparty investor is involved, dividend calculations arebased on ownership share and capital call preparations
become necessary.
We are also receiving more requests fromunderstaffed funds and GPs in need of back officesupport. Also noteworthy is the increase in investmentsfrom government and municipalities. Additionally, I get
the impression that new participants like corporations
are investing more in tech companies related to theirindustry.
by Kazuhiro Matsuzawa, Chairman

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm～TheD X

Innovation Speed Quality

latest in alternative investments～

i nVol.30

2024.2.29

A c c o u n t i n g

ASA’s Story of Digital Transformation
Part 3: DX and SDG (Smart DataGuideway) are under way.

We are especially focused on journal entry
automation from PM reports. Although we haverepeatedly considered and developed this system forover 10 years ago, it was difficult to achieve due tohaving different PM report formats and various SPC(client) requirements.
With some SPCs, individual staff members have used
VBA for journal entry automation, however companywide automation has been difficult as the number ofSPCs increased.
However, after we officially rolled out our SDG plan,
our staff members and system development teambegan to collaborate to develop a system both forcompany-wide use and for individual SPC use. Thiswasn’t revolutionary in any way; it was just a matter ofof collecting information from various formats andproducing one output.

Currently, our SDG plan is in the second step, which issystemization. This is the process of extracting,standardizing, and systemizing necessary data fromvarious AM, GP, and PM information sources. The goal
is to deliver required information faster and moreaccurately. Our ultimate goal is to allow our clients
online access to information on the first business day ofthe month.

Currently, development is in the testing phase, withsome SPCs already using journal entry automation. In
the future, we look to implement the system with more
SPCs, so that we can deliver more accurate and fasteraccounting data to our clients.

As a preliminary step, we are focused on developing:by Hirokazu Ando, ASA Reporting Professional

We plan to develop automated systems not just foraccounting, but for other reports as well.

① Journal entry automation from PM reports② Journal entry automation from bank statements

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

J a p a n

R e a lVol.30

2024.2.29

E s t a t e

The Aftermath of the 2024 NotoPeninsula Earthquake
On January 1, Noto Peninsula of Ishikawa prefecture
was the epicenter of a devastating earthquake. In
particular, the cities of Suzu and Wajima were dealt themost damage, decimating buildings, and bringing fireand tsunami. As of February 8, it left 241 people dead,
11 missing, and 1,182 injured.
I offer my prayers and deepest condolences to thosethat lost their lives. I also pray for those that have been
affected by this tragedy.
The damage was widespread, primarily on old homes
and smaller buildings, but“Within the prefecture, 7 REITs hold a total of 11properties. Of them, 6 hotels, 2 offices, 2 stores, and 1
residential property are around Kanazawa. As of 5pm on
January 3, no REITs reported damage that affectoperations. In the adjacent prefecture of Toyama, 3
investment corporations each hold one property. They
have not reported on any damage.” (Nikkei Real Estate
Market Report, January 3, 2024)
There were no reports of significant damage to fairly big
properties.

This news reminds me of the Great Hanshin
Earthquake of 1995, when I was based in the Kansai
branch of a financial institution. The 40-year-oldcompany apartment was partially damaged and tilted,
while surrounding buildings had collapsed and killedmany.
Compared to the Great Hanshin Earthquake withmagnitude 7.3, the Noto Peninsula Earthquake was 7.6,
so one can easily imagine how powerful it must havebeen.
For those that want to contribute to the affected areas,
volunteering may be a challenge, but perhaps adonation may work (I’ve contributed a small amount aswell).
Account holder nameBank nameAccount number

Ishikawa Prefecture 2024 Noto PeninsulaEarthquake Disaster Relief Fund

Hokkoku Bank PrefecturalOffice BranchOrdinary deposit
28593(Ishikawa Prefecture website)
Disaster Relief Funds
by Shigeru Hirai, Client Relations Group

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

U . S .

Vol.302024.2.29

N e w sA Second Trump Presidency?

What the U.S. and the world may expect
With numerous polls showing Donald Trump as theclear favorite to win the GOP nomination, a second
presidency may possibly be on the horizon. Let’s lookback at some of the major domestic and international
policy changes under Trump’s first term.
Tax Cuts and Jobs Act. Tax cuts proved favorable for U.S.
corporations and wealthy individuals.
• Corporations – Corporate tax rate was permanently
reduced from 35% to 21%.
• Individuals – Standard deductions were nearly
doubled. Tax cuts are reported to have been thebiggest for the wealthiest individuals. These changes
last through 2025.
• Pass-through entities – 20% deduction on passthrough income.
Stock market continued its bull run from Obama’s
presidency. The U.S. stock market performed well and iscomparative to other presidents.
Foreign policy and multilateral agreements
Unprecedented departures from international
agreements included:• Environment (Withdrawal from Paris Agreement.
Also lessened the effects of Obama’s Clean PowerAct)• Trade (Withdrawal from TPP. Trade tension withChina)• Other (Withdrawal from Iran Nuclear Deal and U.N.
Human Rights Council. Also, declared withdrawal
from WHO in the midst of Covid.)

U.S. race relations and political divide
Rallying perhaps a forgotten White America during theObama Administration, it was evident through various
news outlets that race relations were not in a goodplace. He was also known early on for his heavy Twitter
use to empower his supporters and his claims of “fakenews”. This seemed to worsen political divides both ingovernment and the general public. In my memory,there is no more pronounced period in modern U.S.
history where the general public and the media’s
opinion of the President was this divided.
With an America-first mindset and his trademark
slogan of “Make America Great Again”, Trump certainly
caused a strong polarity within America and amongstthe international community. If his first term is anindication of what may come, we can expect someshakeups again.
by Yuichi Totani, Client Relations GroupSara Cultural Centre (Photo: Jonas Westling)
Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

Vol.30latest in alternative investments～

Ta x

U p d a t e

Taxation of Platform Operators[Consumption tax treatment ofcross-border services]
For hotel investment funds, the use of hotel
reservation sites (a B2B operator that provideselectronic services) has been subject to the reverse
charge method since October 2015. Over 8 years havegone by since then. Meanwhile, the domestic market
for consumer-use mobile apps was 904.4 billion yen in2015 and projected to grow to 5 trillion yen this year.
For the provision of “consumer-use” electronicservices, tax is ordinarily assessed on a foreign operator
making the sale. However, the challenge was that suchoperators often do not have a physical location in Japan,
making taxpayer identification and investigation difficult.
The issue was to appropriately assess tax on foreign
operators to put them on equal footing with domesticoperators.
The 2024 tax reform proposes taxation on platform
operators, which is a system to collect the appropriate
consumption tax from platform operators like Google
and Apple, instead of app developers.

If the proposed tax reform goes through, starting April
1, 2025, for sales of electronic services, platform
operators with sales that exceed 5 billion yen in the tax
period will be designated by the tax agency
commissioner as a “specified platform operator” thatmust file a consumption tax return.
Meanwhile, as payment options expand, there isconcern that buyers will select a payment service
provider other than the platform that sells apps. This
may render the tax law on platform operators to
become obsolete. To prevent this, the split payment
method is one way to instead place the tax filingobligation on payment service providers. Perhaps toprepare ahead, some European countries have begun
CESOP (Central Electronic System of Payment
information) which is a system that requires payment
service providers that engage in cross-bordertransactions to report on a quarterly basis.
As the global digital economy grows even bigger, tax
treatment (not only on consumption tax) of crossborder transactions will become a greater focus.
by Yasuhiro Ando, Tax Consulting Group

Only foreign platform operators
providing digital services with
Sales over 5 billion yen

Possibility of unpaid
consumption tax【Current】
Foreign operator

2024.2.29① App sales

Platform
operator

Consumer【Proposal】① The platform is deemed
as making the app sale

Foreign operator② Sales price + tax③ Sales price③ Report

Platform
operator

Consumer② Sales price + tax④ Report

Tax OfficeTax Office

Source: METI “2024 Economy, Trade, and Industry related, Tax Reform Proposal (December 2023)”
Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

E d i t o r ’ s

Vol.302024.2.29

A f t e r w o r dMid-February felt like Spring on some days and while
it was a pleasant break from Winter, it seems to befurther proof that global warming continues.
According to a Nikkei article, the Financial Services
Agency is considering a mandate on Tokyo Stock
Exchange Prime listed companies to disclose GHG
emissions and to further prompt decarbonization.
There has also been more discussion aboutsustainability disclosures on annual securities reports
and assurance on such information. Perhaps there will
be more ESG-related investments to be made for thecountry.
With a lot of uncertainty in the world right now, a keen“eye” for investments and business is necessary and an“eye” to accurately evaluate. Without being blinded or
distracted, I feel it’s important to keep an eye out for
relevant and timely information.
by Jun Murata, Corporate Officer

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.