Issue 11 Volume 17 November 2021 DRIVING BUSINESS SUCCESS PLUS: FILING FOR THE 21ST CENTURY Tax experts respond to the Inland Revenue Department’s RTQLGEV QP GNGEVTQPKE ƂNKPI QH RTQƂVU VCZ TGVWTPU IT CONFERENCE 2021 5RGCMGTU CV VJKU [GCToU EQPHGTGPEG FKUEWUU VGEJPQNQI[ VQQNU CPF VTGPFU HQT C RQUV %18+& YQTNF SECOND OPINIONS *QY ECP EQORCPKGU CEJKGXG VJGKT FGECTDQPK\CVKQP VCTIGVU! NURTURING TRUST Masahiko Tezuka, %JCKTOCP CPF 2TGUKFGPV QH VJG Japanese Institute QH %GTVKƂGF 2WDNKE Accountants, on his DKIIGUV EJCNNGPIG OGGVKPI UQEKGV[oU GZRGEVCVKQPU QH %2#U
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PRESIDENT’S MESSAGE APLUS November 2021 1 The first meeting between the Financial Services and the Treasury Bureau, the Financial Reporting Council (FRC) and the Institute was held this month to kick start preparation for the transitional arrangements, and to discuss the implementation of the new regulatory regime. The FRC will be developing its own guidelines, and the Institute will seek to offer its expertise and experience. In November we hold important annual events of our Institute, including two major conferences and one of our major outreach events. Supporting our small and medium practices (SMPs) and helping them to develop is an important task of our Institute. Providing training opportunities and updates on the latest developments helps SMPs to prepare for the future. At the 2021 SMP Symposium, held as a virtual conference on 26 November, we discussed topics of importance to our SMPs including the latest developments at the International Federation of Accountants, the regulatory reform, important issues for Trust or Company Service Provider licensees, taxation matters, financial reporting and auditing standards, digitalization and practice reviews. A recording of the symposium will be available at a later date if you missed out on the live event. The Young Members Conference was held as another virtual conference on 6 November. The discussions at the conference covered the skill sets young CPAs need in the artificial-intelligence-enhanced world, where automation carries out mundane tasks and there is a growing emphasis on the corporate social responsibility of organizations. It is important for all of us – no matter what stage of our career we are at – to continue to develop the skills we need to serve our employers or clients. The world continues to change, and we must change with it. The annual Mentorship Programme is back for 2022-23. Since its launch in 2015, the programme has paired over 1,400 mentors and mentees together to learn from one another. Join as a mentor or as a mentee to develop yourself. More details are available on the Institute’s website. The HKICPA Business Case Competition promotes our profession to university students. The competition sees students from Hong Kong, Mainland China and Macau, and this year for the first time from overseas universities, compete in two competitions for attractive cash prizes and internship opportunities. The competition tests entrants’ academic competencies and business know-how to solve real-life challenges. This year we had over 650 entrants taking part in the two competitions, over 250 in the Hong Kong competition and over 400 in the Mainland, Macau and overseas competition. It is good to see the competition continues to attract so many students, and it was a wonderful experience to be part of the judging panel for the Hong Kong part of the competition, and crown the winners. You may notice some changes to A Plus this issue. We’ve introduced two new Q&A profiles of two members, one in business and one in practice, asking five questions about their careers. I hope you enjoy these new features. The Council election is an important exercise for our Institute. 2022 will be a transformative year for the Institute with the development of the regulatory reform, and Council playing a vital role in directing the activities of the Institute and helping the profession to develop and excel. I urge you to exercise your right to choose by voting for those candidates. Voting closes at 5:30 p.m. on 6 December. Also do consider viewing the annual general meeting (AGM), starting at 5:30 p.m. on 9 December. The meeting will be livestreamed, and you can submit your questions to the Institute before the meeting, with answers posted online afterwards. More details about how to vote in the Council election or watch and take part in the AGM are available on the Institute’s website. Raymond Cheng FCPA (practising) President Dear members, “2022 will be a transformative year for the Institute with the development of the regulatory reform, and Council playing a vital role in directing the activities of the Institute and helping the profession to develop and excel.”
CONTENTS Issue 11 Volume 17 November 2021 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 Filing for the 21st century Experts share their views on the Inland Revenue Department’s e-Filing Project 14 Leadership: Masahiko Tezuka The Chairman and President of the Japanese Institute of Certified Public Accountants on nurturing accountants to meet society’s needs 20 New solutions for the new reality Speakers and panellists at the Institute’s IT Virtual Conference 2021 discuss how businesses can harness digital solutions to succeed in this day and age 26 Second opinions How can companies achieve their decarbonization targets? 28 How to Aves Chan FCPA, Chief Financial Officer at theCLINIC, and a mentor of the Institute’s Mentorship Programme, on how to make mentorship work in a hybrid world 29 Thought leadership: Chris Joy FCPA The Institute’s Executive Director on the key role of the profession in climate-related reporting 30 Q&A with a PAIB Sam Fok CPA, Co-founder and Chief Operating Officer of Hong Kong Virtual Asset Exchange Limited 31 Q&A with a PAIP Cyrus Cheung CPA (practising), Partner, ESG Services at PwC 33 Meet the speaker What to expect from the 2021 Compliance Forum, available as an e-Seminar 08Filing for the 21st century With the Inland Revenue Department setting out proposals for its project on electronic filing of profits tax returns, tax experts discuss what it means for Hong Kong 30 Q&A with a PAIB 31 Q&A with a PAIP
DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Copy Editor Jeremy Chan Associate Editor Nicky Burridge Contributor Jolene Otremba ,i}ÃÌiÀi` "vwVi 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Raymond Cheng Vice Presidents Rosalind Lee Ken Li Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Dr Wendy Lam Associate Director of Corporate Communications Paul Smith Editorial Coordinator Maggie Tam "vwVi č``ÀiÃÃ 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk SOURCE 34 Breaches to the code of ethics: A case study for PAIPs The second of two case studies in A Plus, developed by the Institute’s Ethics Committee 36 Technical news WORK-LIFE BALANCE 40 Adding balance to life Convenors and organizing committee members of the sports and recreational interest groups share their highlights of the year 46 Young member of the month Kevin Li CPA, Head of Finance at Feeld 48 Leisure Institute members recommend their favourite ways to unwind 20 New solutions for the new reality Speakers and panellists at the Institute’s IT Virtual Conference 2021 discuss how businesses can adapt to the new normal through digitalization and meet the needs of both clients and customers 48 40 Adding balance to life Leisure A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants November 2021. Print run: 7,125 copies The digital version is distributed to all 47,078 members, 17,252 students of the Institute and 2,358 business stakeholders every month.
NEWS Institute news Business news 4 November 2021 The Council election is an important exercise for the Institute. Members are urged to exercise their right by selecting seven candidates to join the Council for the year following the annual general meeting (AGM) on 9 December. Voting for the election closes on 6 December. The candidates’ Personal Information Sheets and additional campaign materials, if any, are available on the Council election 2021 webpage on the Institute’s website. Members can cast their votes either by ballot paper or by e-voting, but not both. More information on registration to attend or view the livestream of the AGM, submission of questions prior to the AGM and the proxy form, are available on the Institute’s website. Mandatory CPD requirements for 2022 membership renewal The 2022 renewal notice was sent to members on 8 November. Members are required to file their annual return with their continuing professional development (CPD) declaration and pay their annual fee by 15 December to renew their membership. Members must complete 120 hours of CPD in a three-year rolling period, of which 60 hours must be verifiable. Renew or check renewal status via the Institute’s website. The Compliance 2021 Annual Report out now The Compliance 2021 Annual Report is now available on the Institute’s website. The report outlines the Compliance Department’s key activities and statistics for the year ended 30 June 2021. It also features the process review of the department’s operations carried out by the Institute’s Regulatory Oversight Board. Learn more about LegCo representative candidates A virtual forum will be organized on 6 December where the candidates for the accounting functional constituency will present their election platforms ahead of the Legislative Council (LegCo) General Election, which will be held on 19 December. There are four candidates standing for election: Man Seeyee, Wong Chun-sek, Edmund, Wong Wang-tai, and Yung Kin. Join this forum to learn more about the candidates’ election platforms before voting for your LegCo representative. Enrol by 2 December. Mentorship Programme 2022-23 open for applications Join the Mentorship Programme 2022-23 to enrich your professional development or contribute to the profession. Members with less than seven years of post-qualification experience may apply to become a mentee, while those with seven or more years, a mentor. Visit the Mentorship Programme webpage to learn more about the programme and how it has helped both mentors and mentees. Applications must be submitted by 14 January. Council meeting minutes The abridged minutes from the October Council meeting are now available for members to read. They can be found in the “Members’ area” of the Institute’s website. Council election and annual general meeting
APLUS Settlements Chan Shek Chi CPA (practising) and Yu Kwong Fat CPA (practising) The Hong Kong Institute of CPAs has settled regulatory proceedings concerning alleged breaches of its professional standards by Chan Shek Chi CPA (practising) and Yu Kwong Fat CPA (practising). The matter concerns audit deficiencies identified from the Institute’s practice review of Cheng & Cheng Limited. The review covered the corporate practice’s audit of the consolidated financial statements of a Hong Kong listed group for the year ended 31 December 2016. Chan was the engagement director, and Yu was the engagement quality control reviewer. The practice reviewer found that the audit team failed to obtain sufficient audit evidence, and prepare adequate documentation, on material sums of deposits paid by the listed group for investment opportunities. Deficiencies were also noted in audit procedures performed and documentation prepared on trade and other receivables, inventories, deferred tax liabilities, stock options issued, legal claims, and property, plant and equipment. Furthermore, certain relevant audit working papers were left out of the final assembled audit file. As a result of the above: a) Chan failed or neglected to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 230 Audit Documentation, HKSA 500 Audit Evidence and the fundamental principle of Professional Competence and Due Care in sections 100.5(c) and 130 of the Code of Ethics for Professional Accountants; and b) Yu failed or neglected to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements. Settlement agreement: The Council of the Institute has agreed with Chan and Yu that: 1. Both of them acknowledge the facts of the case and areas of non-compliance with professional standards; 2. Both of them be reprimanded; and 3. Chan pay a financial penalty of HK$100,000 and costs of HK$25,900, and Yu pay a financial penalty of HK$50,000 and costs of HK$12,950. Chan Chi Kwong, Dickson CPA (practising) and Sum Chun Ho CPA (practising) The Hong Kong Institute of CPAs has settled regulatory proceedings concerning alleged non-compliance of its professional standards involving Chan Chi Kwong, Dickson CPA (practising) and Sum Chun Ho CPA (practising). The matter concerns significant audit deficiencies identified from the Institute’s practice review of JH CPA Alliance Limited. The practice review covered an audit of the consolidated financial statements of a Hong Kong listed company and its subsidiaries for the year ended 31 December 2016. Chan was the engagement director, and Sumwas the engagement quality control reviewer. The practice reviewer found that the audit team failed to obtain sufficient audit evidence, and prepare adequate documentation, on a number of material financial statements items pertaining to the subject company’s acquisition of a business. Those items comprised a promissory note issued by the company as part of the consideration paid, a profit guarantee given by the vendor of the business, and impairment of the goodwill acquired. As a result of the above: a) Chan failed or neglected to observe, maintain or otherwise apply HKSA 230 Audit Documentation, HKSA 500 Audit Evidence and HKSA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures; and b) Sum failed or neglected to observe, maintain or otherwise apply HKSA 220 Quality Control for an Audit of Financial Statements. Settlement agreement: The Council of the Institute has agreed with Chan and Sum that: 1. Both of them acknowledge the facts of the case and areas of non-compliance with professional standards; 2. Both of them be reprimanded; and 3. Chan pay a financial penalty of HK$75,000 and costs of HK$63,000, and Sum pay a financial penalty of HK$60,000 and costs of HK$31,500. The Institute considers a settlement on the agreed basis to be in the public interest. In the circumstances, the Institute is satisfied that there is no purpose to be served in pursuing disciplinary proceedings. Details of the settlements are available on the Institute’s website. November 2021 5
APLUS NEWS Business US$17.2 BILLION Value of Nissan’s vehicle electrification plan, as the Japanese carmaker seeks to dominate the electric cars market. Nissan’s plan includes the proposed introduction of 23 electrified vehicle models by 2030, 15 of them fully electric. US$94M The annual fee for auditing HSBC. The heads of the bank in London invited the Big Four to tender, following the end of PwC’s contract after 10 years in 2025, but found the firms were reluctant to bid for the bank’s audits, according to the Financial Times. The role will last 10 years, but a number of firms are concerned with the resources required, the report said. 20,000 Number of new jobs PwC will create in Greater China over the next five years, doubling its workforce in the region as part of a US$1.25 billion investment. PwC’s plan is part of its New Equation global initiative aimed at creating 100,000 jobs globally. eCode 2.0 The enhanced version of the eCode, a digital tool to access and navigate the International Code of Ethics for Professional Accountants, has been launched. More details on Technical News on page 37. Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities Title of the International Auditing and Assurance Standards Board exposure draft. The Institute is seeking comments on it by 31 December. More details on Technical News on page 36. 2.8 MILLION YUAN The amount Tenpay, an online-payment unit of Tencent Holdings, was fined for violating foreign exchange rules, according to the State Administration of Foreign Exchange branch in Shenzhen. 49% The percentage of the 43 initial public offerings that raised US$1 billion or more this year in London, Hong Kong, Mumbai and NewYork trading below their issuance prices, according to Dealogic data. Shares in International Airlines Group, which owns airlines including British Airways, fell by 14 percent on 26 November after new COVID variant Omicron triggered restrictions on travel from southern African countries. “Capital markets can have an essential role to play in reaching net zero. But that can only happen when sustainability information is produced with the same rigour, assurance of quality and global comparability as financial information.” – Erkki Liikanen, Chair of the IFRS Foundation Trustees, during his speech at COP26 on 3 November. He announced the formation of a new International Sustainability Standards Board to develop high-quality sustainability disclosure standards. November 2021 7
TAX e-Filing Project 8 November 2021
APLUS The last two years can be defined as an era of digital transformation, driven by the pandemic, where companies and businesses around the world have been in a race to supercharge and digitalize their services and operations. Hong Kong’s Inland Revenue Department (IRD) is no exception and has embarked on a major digitalization process to implement electronic filing of profits tax returns, which it calls “the e-Filing Project.” To expand on details, the Hong Kong Institute of CPAs hosted a live webinar this month titled “The IRD’s eTAX Journey,” where William Chan CPA, Tax Partner at Grant Thornton and Chairman of the Institute’s Taxation Faculty Executive Committee, welcomed Benjamin Chan CPA, Acting Deputy Commissioner (Technical) of the IRD, who explained the purposes, objectives and key benefits for going digital as well as the IRD’s proposals for taking forward the e-Filing Project. Currently, due to limitations of the IRD’s existing information technology (IT) infrastructure, only a small number of profits tax returns can be furnished electronically through the existing eTAX Portal, and most profits tax returns are submitted in paper form. According to the IRD, one of the main reasons for implementing the e-Filing Project is to strengthen its IT infrastructure and to keep pace with global trends. “It’s really about modernizing and digitalizing our tax administration,” says Benjamin Chan. “This is an important initiative for our city, and this will benefit everyone including practitioners and businesses.” FILING FOR THE 21ST CENTURY The Inland Revenue Department is rolling out the e-Filing Project as part of its journey towards digital transformation. Experts tell Jolene Otremba why the digitalization of profits tax returns is long overdue, and how businesses both big and small and individuals can benefit by preparing for this necessary shift Photography by Calvin Sit November 2021 9
TAX e-Filing Project Experts in the field agree and say it would be a welcome move, seeing that many businesses are still filing profits tax returns in paper format and have to visit the IRD’s office to submit their returns in person. “The world is online, so we need to go online,” says William Chan. “We have been asking for this and a timeline for quite some time.” Timothy Chuk, Director of Asia Pacific Tax at Trinseo and Hong Kong Vice President of the Tax Executives Institute, agrees, saying that the move would save time and that COVID-19 has highlighted the inefficiencies of submitting tax returns in person to the IRD’s office. “These visits were made a lot harder during COVID-19,” he says. “There’s only one location for taxpayers to speak to someone or to submit their documents. It just doesn’t make sense.” Why should the IRD digitalize? Aside from these conveniences, there are also a host of reasons why the IRD has been actively pursuing the e-Filing Project. Firstly, there is a need to comply with international standards. The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published its second Peer Review Report on the Exchange of Information on Request of Hong Kong (China) in March 2019. The Global Forum recommended that Hong Kong should take measures to ensure that all accounting records of all relevant businesses are made available. “The peer review report highlighted a problem that we need to address. Quite a number of companies in Hong Kong don’t need to file their profits tax returns annually for a number of reasons, for example, newly incorporated companies, and companies that have sustained losses continuously or have been dormant for the past few years,” Benjamin Chan says. Given that there are around 1.4 million locally incorporated companies registered with the Company Registry in Hong Kong, he says that submitting all profits tax returns along with audited financial Benjamin Chan CPA, Acting Deputy Commissioner (Technical) of the Inland Revenue Department. “We must utilize technology in our businesses, and the IRD needs to do the same.” 10 November 2021
APLUS statements and tax computations in paper forms – the way it is done now – would make universal filing of tax returns a cumbersome task to manage. “Tremendous manpower resources would be required for processing paper profits tax returns, and on top of that we need to think about the storage, so in this area, we really need to think of a way that we can manage the processing of returns effectively and efficiently without paper,” he says. To cope with this, a full adoption of electronic filing of profits tax returns for businesses has to be implemented. “Given what is needed, we really need to improve our uploading capacity for audited financial statements and tax computations and the inline eXtensible Business Reporting Language (iXBRL) format is, in our view, a viable option,” Benjamin Chan reiterates. Another reason to go digital, according to the IRD, is to improve operational efficiency and service performance. The implementation of digital services could help the IRD streamline the administrative processes. Digitalization will also seek to upgrade the IRD’s current infrastructure and ability to provide more e-services to help facilitate the tax filing process, which may translate into a higher adoption rate of e-filing by taxpayers. “For multinational corporations, the entire profits tax compliance process from preparing the working files for the tax return to internal reviews are all done online already, yet the Hong Kong government still requests a paper copy of tax return, audited financial statement and tax computation when everything is already digital,” says Chuk. “We must utilize technology in our businesses, and the IRD needs to do the same.” “The IRD can increase their operational efficiency and have better usage and management of data collected during the tax filing process. This will also benefit taxpayers, who can do e-filing from anywhere; they don’t have to bother with opening hours of the IRD’s office or get to a post office,” says Anita Tsang CPA, Director of Tax Policy and Knowledge Management at KPMG Tax Services Limited. Local initiatives are also adding pressure on the IRD to go digital. The Hong Kong government has been investing heavily in its Smart City Initiative with the launch of the Smart City Blueprint. With a mission to make Hong Kong a world class smart city, the Office of the Government Chief Information Officer already has the “iAM Smart” platform, which brings together personalized digital government services that allow users to conduct online government and commercial transactions, and manage their tax filing using a single digital identity and authentication. Implementation of the project The e-Filing Project will take place in two phases. The first phase, which is to be completed by 2023, will involve enhancing the existing eTAX Portal to enable more businesses to voluntarily and digitally file their profits tax returns together with financial statements and tax computations in iXBRL format. The next phase is to develop a new business tax portal, which is expected to be completed by 2025. Taking into consideration and observing how other jurisdictions have made the transition, the IRD has set out a timeline that aims at full implementation of electronic filing of profits tax returns, tentatively by 2030. “This is seen as a positive move as it means that the government is taking a careful and calculated approach, rather than a rushed implementation,” says Tsang. “These are all moves in the right direction as this is a long-term plan,” added Chuk. According to the industry, in order for the project to be successful, changes have to be made in a number of areas. These include technological, legal and procedural changes, and a mindset change. Technological changes Experts agree that the e-Filing Project will present challenges, noting that having the technology in place and getting it right will be the IRD’s greatest challenge. But Tsang thinks the IRD has an advantage as other countries have successfully implemented similar digital solutions. “Hopefully, migration won’t be that painful, as other parts of the world have already been using it for some time. The IRD can learn from other countries’ experience,” she says. Now is also a good time for organizations to implement technology and adopt new infrastructure for tax, according to Albert Lee, Global Co-Leader and Asia Pacific Leader –Tax Technology & Transformation at EY, because the IRD will be relocating its offices to the Kai Tak Development Area. The move will take place in phases starting in late 2022. “This change will attract new skills and talent in a new environment, but it can also help change their departments’ teams frame of mind and be more inspired to transform,” Lee says. “The IRD can increase their operational efficiency and have better usage and management of data collected during the tax filing process. This will also benefit taxpayers, who can do e-filing from anywhere” The Inland Revenue Department commissioned a consultancy study on the Departmental Information Technology Plan in August 2018 which was completed in June 2019. The study recommended the department to develop a Business Tax Portal to facilitate e-filing of tax returns by businesses with accounting and financial data. November 2021 11
TAX e-Filing Project The IRD has been working on the development of a taxonomy package that will help facilitate Hong Kong businesses to tag their financial statements and tax computations in order to generate iXBRL data files. The IRD has sought the views and feedback through a consultation process and has included them in its IT development and proposals. “This is necessary for us to adopt, and aside from tax reporting, it has a lot of good uses especially in data analysis,” Benjamin Chan explains. “Sixty jurisdictions around the world have already adopted the iXBRL reporting requirements for regulatory and supervisory purposes.” The XBRL is the worldwide standard for tagging business data for computers to process intelligently, making it easier to do business reporting and evaluation. Benjamin Chan explains that the iXBRL data would be humanreadable and structured, as well as machine-readable data. This helps enterprises improve their accountability and transparency of business performance, and ensures that investors can easily understand their financial data. According to Tsang, the key benefits are a faster review process and a much better handling of data and analysis. Despite the potential for change, there continues to be concerns among some businesses and user groups, such as the elderly, regarding the shift to e-filing. But William Chan says that this has all been taken into account, and that vendors will develop something that’s easy to use, even for small and medium enterprises and other users. “Not everyone has the latest version of software like the big companies, so hopefully it’s compatible even with older computers,” he says. Legislative changes “The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was enacted this year to enhance the statutory framework for furnishing tax returns in Hong Kong. It included provisions to allow service providers to furnish returns for or on the behalf of taxpayers, as well as setting out the legal obligations and liabilities of taxpayers and service providers,” says Benjamin Chan. “The ultimate goal is to help the government to reduce its cost in revenue collection, and with this digitization, if something is unreported, it can be detected very easily,” Chuk says. “This will consequently improve taxpayers’ systems and processes for external reporting,” Lee adds. Benjamin Chan says: “It’s important that everyone understands their legal obligations, especially practitioners who are appointed by taxpayers to furnish tax returns for them or on their behalf.” Procedural changes The IRD recognizes that getting all businesses on board could be tricky, especially when faced with too many technological barriers, or if it impacts the design of a company’s accounting software. As such, the IRD has been proactively encouraging businesses to upgrade or develop their own computer programmes that are capable of converting audited financial statements into iXBRL format for tax filing purposes. Tsang calls this an “allimportant change” that requires the government’s full support. “We understand that this could be an area of concern for some people, but we have put in place various kinds of IT support to help taxpayers and practitioners adjust. These include offering an IT support service hotline to help taxpayers or interested parties to upgrade their computer systems, a provision of free conversion tools, a provision of an e-concierge service, and an invitation for a trial run,” says Benjamin Chan. Tsang applauds the IRD’s phased efforts, and says that the provision of free conversion tools to help businesses convert their files into iXBRL format, and the provision of an e-concierge are all the right approaches. “This way, smaller businesses that have limited resources have more time to prepare for change, and this will offer some f lexibility to do e-filing and plan ahead,” she says. Mindset change While technology might feel like a hurdle to some businesses, Lee “People are used to paper-based files. Even though most Hong Kong people are tech-savvy, corporations and individual taxpayers are still used to the old way of doing things when it comes to tax.” “Sixty jurisdictions around the world have already adopted the iXBRL reporting requirements for regulatory and supervisory purposes.” 12 November 2021
APLUS argues that, in some ways, it is the easiest part of this change, noting that the biggest impact is actually in relation to change management. “People are used to paper-based files. Even though most Hong Kong people are techsavvy, corporations and individual taxpayers are still used to the old way of doing things when it comes to tax,” Lee explained. What are the major benefits? The e-Filing Project aims to enhance the efficiency, reliability and accuracy of collecting accounting and financial data from businesses. “Through this, the IRD hopes to achieve a better user experience, greater compliance with international standards and better alignment with government initiatives,” says Benjamin Chan. “The wider use of automatic processing of tax assessments means that the IRD can streamline its administrative process, save or redeploy resources, and reduce paper usage. This will help the overall tax administration become more environmentally-friendly,” he adds. The experts agree, with Lee adding that the completion of the project would modernize Hong Kong’s tax authority. Tsang adds that if the IRD can achieve this, the data gathered through the tax return filing process would provide insight on the tax incentives introduced, allowing the government to deliver better promotions, education of those incentives, and to find new ways to assist taxpayers to make use of them. “Really, this is a win-win situation for all.” Moving forward, William Chan advises taxpayers to be openminded and accept that this is the way going forward. “Everyone has to accept that there will be a period of adjustment,” he added, reiterating Benjamin Chan’s points that the government has put in place the necessary legislative framework and IT support to help businesses make the transition. “Everyone has to bite the bullet. Once everyone gets the hang of it, it will make life easier.” William Chan CPA, Tax Partner at Grant Thornton and Chairman of the Institute’s Taxation Faculty Executive Committee. “The world is online, so we need to go online. We have been asking for this and a timeline for quite some time.” November 2021 13
PROFILE Masahiko Tezuka SERVING SOCIETY 14 November 2021
APLUS Photography by Benjamin Parks The world is facing many pressing challenges, including climate change, and accountants will play a valuable role in managing them and developing solutions, says Masahiko Tezuka, Chairman and President of the Japanese Institute of Certified Public Accountants. He tells Nicky Burridge about his own challenge of supporting CPAs in Japan as they meet evolving expectations, and focus areas for his organization Masahiko Tezuka, Chairman and President of the Japanese Institute of Certified Public Accountants (JICPA), believes CPAs should serve society. Creating the right conditions for them to do so is a key part of his vision for JICPA, a member of the Global Accounting Alliance (GAA), an alliance of leading professional accounting bodies of which the Hong Kong Institute of CPAs is also a member. “When I assumed the position of Chairman and President in 2019, I set out a vision for ‘A professional organization, trusted by both its members and society, that makes the greatest possible contribution to sound economic development and the realization of greater well-being throughout society,’” Tezuka says. To achieve this vision, he has set five strategic targets for JICPA to meet. The first two are to build confidence in CPAs, and build up relationships with stakeholders, including promoting constructive dialogue with them. The third target is to secure and develop talented human resources, while the fourth is to meet society’s needs, and the final one is to enhance the productivity and transparency of JICPA’s operations. JICPA is Japan’s only self-regulatory body of CPAs and more than 33,000 CPAs in the country are required to register with it by law. “We uphold the professionalism of our member CPAs and audit firms, as well as guide, connect, and supervise them,” Tezuka says. Its main functions are to establish ethical and auditing standards, provide training and continuing professional development, and conduct quality control reviews on audit firms. In performing these functions, it liaises with a wide range of stakeholders, including individual CPAs and firms, as well as regulators in Japan such as the Financial Services Agency, and the Certified Public Accountants and Auditing Oversight Board, and the preparers and users of financial statements, academics, and other groups of experts. International collaboration Tezuka considers a key part of his role at JICPA to be strengthening relationships with other GAA members and exchanging information on current issues and how to address them. “In circumstances where the environment surrounding the industry is changing internationally, the relationship with the GAA has become increasingly important for JICPA to look into the future of the industry from a global perspective and take adequate and timely actions,” he says. He points out that the GAA plays an important role in examining what is currently happening in the industry in different countries, what matters are likely to November 2021 15
PROFILE Masahiko Tezuka affect the future, and what actions accounting professionals should take to manage them. Among the issues currently being discussed are audit reform – particularly in Europe – and the development of international standards for nonfinancial information disclosure relating to sustainability, as well as the impact of technology, such as artificial intelligence, on the profession. JICPA takes part in GAA events, such as the roundtable event for GAA’s Tax Directors Group, which was hosted by the Institute before the pandemic. “GAA events, such as roundtable discussions, give us great opportunities to exchange views and understand legal systems and practices in each region in depth. In addition to that, we can develop relationships with not only GAA members, but also other organizations and relevant parties through panel discussions with guest speakers,” Tezuka says. It is also involved in GAA initiatives to further promote diversity and inclusion in the profession, and leveraging its GAA membership to support its members who are expanding the sphere of their activities, particularly for professional accountants in business. Tezuka explains that the GAA currently has working groups looking at the areas of tax, education, and sustainability. “We also have regular deep dive discussions on specific topics such as diversity, equality and inclusion. We share ideas and information discussed in the session with JICPA directors and groups in charge, and we leverage the ideas and information to develop our own strategy to strengthen our support for our members,” he says. A holistic view Tezuka started his career in 1986 as an auditor with a member firm of PwC, where he became an audit partner within 13 years. He continued to move up the ranks, becoming chief operating officer of Before becoming the Chairman and President of JICPA in July 2019, Masahiko Tezuka served as a partner at Deloitte. At the firm, he held the positions of IFRS advisory group leader, integrated reporting advisory leader as well as managing partner in charge of industries. 16 November 2021
APLUS In Japan, the CPA systemwas introduced in 1948 under a new set of policies seeking to dissolve the nation’s industrial and financial cliques (zaibatsu), to popularize securities trading with citizens, and to increase the number of individual shareholders. The JICPA started as a voluntary organization in 1949 and later became a corporation under the CPA Act in 1966. Today, it has more than 33,000 members. the firmwith responsibility for its overall management between 2005 and 2007. In October 2007, he joined Deloitte Touche Tohmatsu LLC as a managing partner. “I led the launch of new businesses, including setting up a group that supported the application of International Financial Reporting Standards (IFRS) and forming a consulting team for integrated reporting,” Tezuka says. He also served as an industry leader, supervising the four business lines of audit, consulting, tax, and financial advisory services, forming teams and marketing these services. In 2016, Tezuka became an executive board member of JICPA, and took on his current position as Chairman and President three years after. Looking back over his career, Tezuka says one of the most memorable moments was assuming a senior management position at an audit firm shortly after a major accounting fraud by a client had been discovered. He was tasked with reforming the firm. “Such an experience was a great asset for me,” he says. Tezuka also remembers being in charge of due diligence for the acquisition of a major listed company in the days when mergers and acquisitions (M&As) of Japanese companies were rarely conducted. “It was a very hard task, but it helped me a lot in my later career,” adds Tezuka. He thinks his previous experience has been valuable preparation for his JICPA role, giving him a good insight into the practical aspects of managing a global audit firm. “I believe that my knowledge is helpful in communicating with firms and strengthening relationships with the International Federation of Accountants and other overseas institutions. Having engaged in providing audit and consulting services to Japan’s leading corporations is a strength in developing a relationship with the economic community,” he says, adding that during his career he has performed diverse duties in addition to audit work, which has enabled him to view the accounting profession from a holistic standpoint. Tezuka’s work as Chairman and President of JICPA is wide-ranging. His days are packed with meetings with various stakeholders, while he regularly attends events and social gatherings in the evenings, although the COVID-19 pandemic has meant many of these have been moved online. Unsurprisingly, the pandemic has had a significant impact on CPAs in Japan, and Tezuka says when COVID-19 first struck, JICPA had to work with government bodies and other organizations to secure adequate time for them to close corporate accounts and auditing for the fiscal year ending 31 March 2020. It also issued guidance on practical audit considerations under remote work conditions for its members. He considers the biggest challenge of his work to be meeting society’s expectations of CPAs. “Their work ranges widely from audit, assurance, consulting, tax and M&A services to fraud investigations. Going forward, sustainability-related services will expand,” he says. “To meet such needs, it is essential to deepen communication and cooperation with various stakeholders including the economic community, government bodies, councils, academics, and international institutions. JICPA especially focuses on stakeholder engagement.” Future challenges Looking forward, Tezuka thinks society faces many pressing long-term challenges, such as climate change and digitization. To identify these future challenges and steadily put in place measures to help manage them, JICPA is currently working on a vision paper looking 10 years ahead. In the meantime, it published a Sustainable Development Goals declaration earlier this year, under which it sets out how CPAs can contribute to the three areas of economy, society, people and environment, such as “Having engaged in providing audit and consulting services to Japan’s leading corporations is a strength in developing a relationship with the economic community.” November 2021 17
PROFILE Masahiko Tezuka through ensuring the reliability of corporate information, promoting innovation, and fostering awareness of sustainability. “As a professional partner, we will nurture trust, create a prosperous society, and build a brighter future,” Tezuka says. He adds that JICPA is also working on a CPA branding project to help people understand more about the value of CPAs. In addition, it is a signatory of Accounting for Sustainability’s Accounting Bodies Network Net Zero Commitment, under which 14 accounting bodies have pledged to achieve net-zero emissions within their own organizations and help their members to do likewise. “The JICPA has formed a cross-sectoral team to promote our commitment to achieve net-zero emissions. The team is working to formulate an action plan,” he says. A key area for CPAs going forward will be the provision of non-financial information in relation to sustainability, Tezuka notes. “In recent years, society’s needs related to corporate disclosures have become more comprehensive, extending beyond the disclosure of financial information. Not only should we provide high-quality financial statements audits, but we should also examine how non-financial information should be assured in the face of increasing needs for such information,” he says. With this in mind, JICPA is preparing a training curriculum to help its members develop sustainability literacy, particularly in terms of standards being developed on the disclosure of sustainable information, such as by the recently announced International Sustainability Standards Board of the IFRS Foundation. JICPA has previously set up a Special Committee on Corporate Disclosure and Governance, and in June, it published a report looking at how to enhance the usefulness and trust in corporate disclosures, making recommendations such as increasing the scope of mandatory disclosures and introducing standards for non-financial reporting. “JICPA has conducted research on sustainability for almost 20 years and published the findings to support practices. Most recently, we published two research reports, one for introducing the basic issues of climate change and the other one relating to green bonds,” Tezuka says. Technological change Another area Tezuka thinks requires attention from the profession is technological developments. “While the advancement of technology has brought numerous benefits, such as increasing the efficiency of auditing, I think it has also created new challenges, for example, changes in required competences for auditors such as IT skills, due to the digitalization of audited companies,” he says. As a result, JICPA has been focusing on providing IT-related education for its members, and it is working on research looking at the skill set that CPAs will require in the future, as well as the education and training members will need in this area. The pandemic, Tezuka adds, has accelerated digitalization both for the economy and for society. “With such changes, there are not only members promoting the digitalization of auditing processes from the standpoint of auditors, but also many members engaged in the transformation of corporate business processes from the standpoint of professional accountants in business or consultants.” He points out that the CPA system in Japan was established more than 70 years ago to fulfil the need for experts in financial statements audits. “For that reason, Japanese CPAs have been recognized as ‘experts in audits’ by society.” he says. But since then, societal expectations for CPAs have expanded into other fields. “I believe that, in order to continue to meet the changing needs of society, it is essential that every CPA continues to pursue self-improvement. Needless to say, CPAs must have knowledge in accounting and auditing, but they also need to demonstrate a positive attitude and action to expand the sphere of their activities, as the range of fields where they can make social contributions has now expanded,” Tezuka says. He adds that JICPA supports this development of skills through providing the necessary information and training. He says that young CPAs first need to believe in their abilities. “The key is to keep working hard and stay humble. Then, broaden your horizons to find new opportunities and take on bold challenges. If you can keep these up going forward, I am sure you will have a bright future,” Tezuka says. An enthusiastic golfer When he is not working, Tezuka used to be a keen footballer, but he has not played in recent years to avoid injury. “I now put my enthusiasm into playing golf. I really enjoy playing golf under the blue sky with my close friends or other golf club members on weekends. I am struggling to improve my scores though,” he says. Tezuka adds that he also loves dogs, although he no longer has one after his beloved pet passed away five years ago. “I watch dog videos on YouTube to relax, instead of getting a new dog. If I had a little more time, I would love to have another dog.” “The key is to keep working hard and stay humble. Then, broaden \RXU KRUL]RQV WR ȨQG new opportunities and take on bold challenges.” 18 November 2021
APLUS Tezuka, who graduated from the School of Economics of The University of Tokyo, became an executive board member of JICPA in 2016. November 2021 19
IT CONFERENCE 2021 Technology trends NEW SOLUTIONS FOR THE In this technology-driven reality, shaped by the pandemic and the need to meet customer demands, accountants must take up the right tools and transformation initiatives to work effectively. Speakers and panellists at the Institute’s IT Virtual Conference 2021 cover innovative technologies and trends that could help businesses succeed in the new normal. Nicky Burridge reports. In the next decade, the economic performance of every business will be defined by the speed of their digital transformation over the next few quarters, according to Vyin Ng, Chief Financial Officer of Microsoft Hong Kong and Macau. The COVID-19 pandemic has accelerated the pace of digital change, with two years’ worth of transformation happening in the space of just a couple of months, she told the Hong Kong Institute of CPAs’ IT Virtual Conference 2021 held in October and themed “Coming out fromVirtual Reality to the New Reality.” “The trend we are seeing in the market is that customers are very proactive about exploring how to digitally transform their business, not just their normal operations, but how to grow bigger and faster, to keep pace with the market,” she said. Ng pointed out that data is now abundant, and businesses rely on finance professionals to provide reports and insights based on this data. But she added that legacy systems in most companies have lagged the pace of data growth, while mergers and acquisitions have led to systems across large corporations being disconnected, and many systems offer only a static view and are not interactive. “If the tools do not change, finance becomes involved in data reconciliation as a manual process that is very inefficient and creates a lot of errors,” she said. In a keynote address, “Modernization of finance in the new normal,” Ng said the first stage of digital transformation is for companies to enable remote work, including helping teams to collaborate virtually and share files and data in a secure way. The next stage involves optimizing processes by reducing those that do not add value, and managing risk. A key part of this stage is setting 20 November 2021
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