30 September 2010
Mr. Russell G. Golden
Technical Director
Financial Accounting Standards Board
402 Merritt 7Norwalk, CT 06856-5116
USADear Mr. Golden:

re: Comments on Exposure Draft
Accounting for Financial Instruments and Revisions to theAccounting for Derivative Instruments and Hedging Activities(File Reference No. 1810-100)

First of all, please accept our hearty congratulations on your appointment to theBoard effective 1 October 2010. We anticipate that your appointment will further
accelerate the convergence of US GAAP and IFRS.
The Corporate Accounting Committee (CAC) of the Securities Analysts Associationof Japan (SAAJ) is pleased to comment on the exposure draft, Accounting for Financial

Instruments and Revisions to the Accounting for Derivative Instruments and Hedging
Activities put out by the Financial Accounting Standards Board (FASB). The SAAJ is a
not-for-profit organization providing investment education and examination programsfor securities analysts. Its certified members exceed 24,000. The CAC is a standing
committee of the SAAJ composed of 14 members, most of whom are users including
equity and credit analysts, and portfolio managers, while a few others are academicians
and public accountants.

The Default Measurement Attribute for Financial Instruments (Question 13)
The CAC does not believe that the default measurement attribute should be fairvalue. Instead, it supports the mixed measurement attribute model, as proposed by theInternational Accounting Standards Board (IASB), which takes into account holding
purposes with respect to financial instruments. The CAC thinks recognizing periodic
changes in the fair value of financial instruments, which are not held for trading
purposes and which will most certainly be held until maturity or for a very long period,
would result in undesirable volatility in net income or accumulated other1

comprehensive income (AOCI). Fair value information is sometimes useful in corporate
analysis, but in most cases it is sufficient to show the information in a note.
In June 2010, the SAAJ conducted a comprehensive survey of members’ opinions
regarding accounting issues for the first time in five years.* Two questions specificallyfocused on financial instruments. As shown below, for both questions, the majority
preferred the IASB model to the FASB one.
Question Regarding Valuation of Financial Instruments
The IASB permits using the amortization cost method for certain bonds and loans
which are not held for trading purposes. The FASB proposes fair value measurement forthese instruments (included in OCI and recycled when realized). Which method do you
support, the IASB one or the FASB one?
A

Support the IASB method which takes holding purposes into account.

B

Support the FASB method which applies fair value measurement toall financial instruments.

C

Other

63.5%
32.3%
4.2%

Question Regarding Strategic Equities
The IASB proposes measuring strategic equities at fair value (included in OCI, notrecycled upon sales). The FASB proposes measuring all equities at fair value andrecognizing gains and losses on the P/L statement. Which method do you support, theIASB one or the FASB one?
A

Support the IASB method. Recognizing fair value changes in strategicequities on the P/L would make net income too volatile.

38.3%

B

Basically support the IASB method but sales gains and losses should
be recycled to net income.

37.2%

C

Support the FASB method.

19.9%

DOther4.6%

Prohibition of Reclassification (Question 16)
As mentioned above, the CAC thinks financial instruments should be measured,taking holding purposes into account. Hence, it thinks reclassification should berequired when holding purposes are altered because of changes in the business model ofan entity.

* A questionnaire was sent to 17,363 members by e-mail. 690 responded, making for a

4.0% response ratio.
2Concluding Remarks
Many financial statement users in Japan have serious concerns that despite thelong and intensive efforts toward convergence based upon the MoU between the FASB
and the IASB, such huge divergence as outlined above remains with respect to thisimportant financial instruments project. The CAC understands that some financial
statement users in the US advocate full fair value measurement but such views are notshared by all users around the world. The FASB is not only a domestic financial
standards setter for the US, but is also a joint developer, with the IASB, of the single setof financial standards to be used globally. The CAC respectfully asks the FASB to listen
to the voices of the global stakeholders and to come to a final decision that wouldachieve convergence of accounting standards for financial instruments.
If you have any questions or need further elaboration, please do not hesitate tocontact Sei-Ichi Kaneko, Executive Vice President, SAAJ (s-kaneko@saa.or.jp).
Sincerely yours,Keiko Kitamura
Chair
Corporate Accounting Committee3