LA Holdings Co., Ltd.
With just a two-person team: LA Holdings and its outsourcing partner achieve financial disclosure enlisting a lean team of specialists

Many companies have been encountering challenges in the realm of financial results disclosure, which has been subject to increasing complexity year after year due to successive revisions to laws and regulations as well as system changes. For instance, this has included difficulty securing professionals equipped to correctly understand and handle the entire financial reporting process up through final preparation of disclosure documents, while also struggling to ensure that operational expertise gets transferred from experienced staff to others in the organization. LA Holdings Co., Ltd., which enlists a two-person team in handling all of its closing and disclosure tasks, has been one such company working to address these challenges through use of the outsourcing service for financial results disclosure offered by PRONEXUS since 2019. We asked Mr. Yoshimasa Higashi, General Manager of the Accounting and Finance Division at LA Holdings, about how outsourcing enables his lean team of specialists to achieve effective disclosure (Mr. Higashi pictured right with Mr. Ken Hoshino, Assistant Manager of the Accounting and Finance Division, on the left).

Company name

LA Holdings Co., Ltd.

Listing

Tokyo Stock Exchange Growth Market, Fukuoka Stock Exchange Main Board

Fiscal year-end

December

Description of business

New real estate and revitalized real estate sales

Number of employees (consolidated)

102

Number of employees in charge of the financial reporting process

2

Number of consolidated subsidiaries

5

Audit firm

KOA Audit Corporation

―― We were told that you (Mr. Higashi) joined LA Holdings in February 2020, then took charge of the consolidated financial reporting process from the first quarter (January to March) of the fiscal year ended December 31, 2020. Could you describe the accounting and financial disclosure framework at that time and share the impressions you had initially when you first used our outsourcing service?

When I joined LA Holdings, the accounting department consisted of just three members, including myself and two others primarily responsible for daily operations. While I had previous experience managing the full cycle of consolidated financial closing and disclosure at my former job, the prospect of handling the entire consolidation financial reporting process entirely alone was daunting.
However, during the first quarterly settlement of accounts meeting, we were able to share detailed plans, including the schedule for preparing fundamental materials that form the basis for disclosure documents, with the team from DISCLOSURE PRO, a PRONEXUS Group company staffed by CPAs with specialized knowledge. I remember how this alleviated my concerns by clarifying what aspects of the financial results disclosure process I needed to focus on.

―― Were there any advantages in having used our outsourcing service for financial results disclosure immediately after changing your job?

Immediately after joining LA Holdings, I set about to review fundamental material templates, including trial balance tables and consolidated worksheets, and checking accounting figures, given their critical importance. I was able to devote substantial time to this process only because I had a sense of reassurance that DISCLOSURE PRO was handling most of the disclosure document preparation work. At the time, I was essentially working alone, with no one else that I could consult with or rely on. As such, it was very reassuring in being able to freely consult with professionals. It felt as though I had gained a partner, which was a substantial advantage.

――How exactly do you communicate with the CPAs at DISCLOSURE PRO?

We created a communications log, which serves as a running list of questions and answers from both sides. We update it sequentially for future reference at any time. For instance, I might ask for terminology to describe a disclosure item and ask if there are any examples from other companies. Meanwhile, DISCLOSURE PRO might ask for clarification regarding specific numbers in our fundamental materials. I consulted our audit firm in regard to questions on actual accounting entries, but made decisions on preparation of disclosure documents, including technical aspects, in consultation with DISCLOSURE PRO.

――Like many companies listed on the TSE Growth Market, you handle financial disclosure with a lean team of specialists. If you had opted not to use our outsourcing service, what difficulties do you think you would have encountered?

I probably wouldn’t have been able to handle the overall workload. In particular, the timing of the fiscal year-end financial results involves compiling budgets and closing non-consolidated and consolidated accounts. I also need to prepare a wide range of documents, including corporate tax returns, fundamental materials for explanatory notes, financial results reports, convocation notices, business reports and financial statements of subsidiaries, and even securities reports. I also have to accurately and swiftly handle daily and monthly tasks, on top of these numerous overlapping key tasks. I would have spent a lot of time preparing the disclosure documents operating under our current framework, which probably would have resulted in neglecting essential processes such as confirming underlying figures and reviewing the substance of disclosure items. This would hold true even now with our current two-person team that includes Mr. Hoshino in charge of financial disclosure.

―― Your company notably marked a substantial milestone in terms of its re-listing, which accompanied its transition to a holding company structure in July 2020. This consequently also called for financial disclosure encompassing non-standard practices. As such, what were your greatest challenges at that time in retrospect?

I remember having an overwhelming workload at that time. On top of verifying accounting and tax procedures, I was swamped with work that also included consulting with Kanto Local Finance Bureau officials to process the delisting of our predecessor company, L’attrait Co., Ltd. Although it felt as though I was taking on two to three years of work all at once, I had a sense of reassurance knowing that the task of disclosure document preparation was in capable hands assuming that I was able to get the fundamental materials ready at the very least.
Having DISCLOSURE PRO available for consultation whenever necessary was invaluable. I reached out to DISCLOSURE PRO extensively for specific details ranging from how many years of corporate history were required for inclusion, and extended to the notion of how best to handle the third quarter (July to September), as this is the first fiscal period for the new holding company.

――You mentioned earlier that one of the first actions you took after joining the company was to reorganize fundamental materials to make them easier to use. Did you receive any advice from DISCLOSURE PRO at that time?

Yes, I did. With respect to consolidated worksheets, for instance, I initially used a template that I had created myself for the first-quarter closing right after I took up the position. Upon reviewing it later, DISCLOSURE PRO suggested using a template that would make the process more efficient and straightforward, and provided a sample template as part of their improvement recommendations.

Their template is thoughtfully designed with subtle improvements. To give one example, it helps prevent transcription errors by presenting the items of the consolidated worksheet in the same order as the items of the financial results reports. It’s a minor detail, but very practical and useful.

In addition, I still use their recommended selling and administrative expenses assessment worksheet. When I paste selling and administrative expenses data into the worksheet, any items subject to disclosure are displayed in red. It is helpful when I am short on time.

―― ――Has using the outsourcing service helped with accumulating and visualizing know-how, or with improving the skills of key personnel?

When I first joined the company, I knew absolutely nothing about financial results disclosure outsourcing, and I was concerned that entrusting tasks to others would impede our ability to amass know-how. However, we have been able to get timely feedback through our interactions with the DISCLOSURE PRO team on concerns that include previously undetected errors and matters we had overlooked. In addition, the team promptly responds to our questions particularly on related uncertainties while also providing examples from other companies. This enables us to accumulate know-how by sharing such information in-house, which has in turn helped improve our skills. I now believe that outsourcing is the best way to operate with a lean team of specialists, given the sense that we have truly gained capable partners.

Moreover, we retain the communications log I mentioned earlier with information that includes historical records. As such, I think the communications log will be helpful when the need arises to hand tasks over to others in the future.

―― It has now been about six years since LA Holdings began using our outsourcing service. During that time, did you observe any year-on-year improvement, particularly in operational efficiency?

The company’s operations have continued to expand steadily even after embarking on use of the outsourcing service, partly through mergers and acquisitions. Despite this growth, we managed to substantially reduce time required for monthly and quarterly financial reporting. Over the first two to three years after I took up my position, I often worked late into the night on weekdays and came in on weekends even during the quarterly financial reporting period. In recent years, however, I no longer have to work late into the night and I rarely need to come in on weekends anymore.

Going forward, we aim to achieve earlier disclosure of financial results reports leveraging the extra capacity created by these efficiency gains. We currently disclose our quarterly results within 45 days after the end of each quarter, but I personally aim to carry out disclosure within 30 days. We will continue to overhaul our operations to further accelerate the financial disclosure process.

―― The Financial Services Agency has requested that all listed companies submit their annual securities reports prior to their shareholders’ meetings. If your company were to file its report prior to its shareholders’ meeting, what concerns would you have regarding operational processes, and what expectations would you have for outsourcing support?

At LA Holdings, we fully recognize the importance of timely and efficient disclosure of information to our shareholders, including submission of our annual securities report before our general meeting of shareholders. From an operational process perspective, our concerns lie mainly in setting schedules and establishing operational settings aligned with operational needs, particularly in terms of audit timelines and internal review processes. For fiscal year-end closing in particular, we hope to achieve even greater coordination to gain support for ensuring timely and appropriate disclosure, which includes assistance involving scheduling as well as handling of timely disclosure and extraordinary reports following general meetings of shareholders.

Research Team, Disclosure Planning and Operation Promotion Department

• The preceding content has been prepared based on various sources of information available as of the date on which this document was released.