18 February 2011
Mr. Tsuguoki Fujinuma, Vice Chair
Mr. Robert Glauber, Vice ChairIFRS Foundation
30 Cannon StreetLondon EC4M 6XHUnited Kingdom
Dear Messrs. Fujinuma, Glauber:
re: Comments in Response to Paper for Public Consultation,“Status of Trustees’ Strategy Review”
The Corporate Accounting Committee (CAC) of the Securities Analysts Associationof Japan (SAAJ) is pleased to comment on Paper for Public Consultation “Status ofTrustees’ Strategy Review” put out by the IFRS Foundation (IFRSF). The SAAJ is a
not-for-profit organization providing investment education and examination programsfor securities analysts. Its certified members number 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 CAC writes comment letters to global standard setters
including the International Accounting Standards Board (IASB) and AccountingStandards Board of Japan (ASBJ), and exchanges opinions with organizations including
the ASBJ and the Financial Services Agency.
General Comments
The CAC basically thinks that a single set of high quality, understandable, andenforceable global financial reporting standards can be developed when the IFRSF
pursues its activities in line with the objectives stipulated in the Constitution and withthe three-tier structure of the Monitoring Board, Trustees, and the IASB. Major
securities markets regulators should be involved in the accounting standards setting
process in order to reconcile diversified views and requests unique to each of theirmarkets. However, the IASB’s authority to independently develop IFRSs should be heldin the highest regard. To the CAC’s eyes, the IASB sometimes seems to deviate fromthe objectives in developing individual IFRS––the CAC wants the IASB to continue todevelop IFRSs but with a stronger awareness of its mission. Following are our answers

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to specific questions.
Mission: How should the organisation best define the public interest to which it iscommitted?
1. The current Constitution states, “These standards [IFRSs] should require highquality, transparent and comparable information in financial statements and otherfinancial reporting to help investors, other participants in the world’s capital markets
and other users of financial information make economic decisions.” Should thisobjective be subject to revision?
The CAC thinks the current Constitution is sufficient and that there is no need for
immediate revision. It thinks “investors, other participants in the world’s capital markets
and other users of financial information” is a comprehensive concept that includes not
only equity and credit providers but also preparers. Some CAC members opined that“high quality, transparent and comparable information” was rather abstract, but themajority thought adhering to “help investors, other participants in the world’s capital
markets and other users of financial information make economic decisions” would see
the objective of developing standards with “high quality, transparent and comparableinformation” being achieved.
2. The financial crisis has raised questions among policymakers and other stakeholders
regarding the interaction between financial reporting standards and other public policy
concerns, particularly financial stability requirements. To what extent can and should
the two perspectives be reconciled?
It would appear that this question is raised because there is debate as to whether
prices formed in a market that has lost liquidity, such as during a financial crisis, shouldbe accepted as fair value, bearing financial stability requirements in mind. The CAC
emphasizes that the prudential regulators, not the accounting standards setters, areresponsible for financial stability. Of course, the accounting standard setters should
maintain close communication with the prudential regulators, but the standard setters’
utmost priority lies in providing high quality, transparent, and comparable financial
information to investors. The IASB’s authority to independently develop IFRSs shouldbe held in the highest regard.

2Governance: how should the organisation best balance independence withaccountability?
3. The current governance of the IFRS Foundation is organised into three major tiers:
the Monitoring Board, IFRS Foundation Trustees, and the IASB (and IFRS Foundation
Secretariat). Does this three-tier structure remain appropriate?
The CAC thinks the three-tier structure is, broadly speaking, functioning effectively.
The Monitoring Board, having major capital markets regulators as members, is in aposition to see to it that the IFRSs are developed to be useful for the economic decision
making of various capital market participants. As the Monitoring Board was establishedquite recently, it is premature to make final judgment of the appropriateness of thethree-tier structure.
4. Some stakeholders have raised concerns about the lack of formal politicalendorsement of the Monitoring Board arrangement and about continued insufficientpublic accountability associated with a private-sector Trustee body being the primary
governance body. Are further steps required to bolster the legitimacy of the governancearrangements (including in the areas of representation of and linkages to publicauthorities)?
The CAC thinks the above concerns are irrelevant. As two members of theMonitoring Board are from the IOSCO which oversees global capital markets, it should
be construed that sufficient linkage has been established between the IASCF and thecapital market regulators, without any formal political endorsement. As the BaselCommittee is also participating as an observer of the Monitoring Board, opinions andviews can be exchanged between the IFRSF and the prudential regulators, making itunnecessary to take additional measures.
Process: how should the organisation best ensure that its standards are high quality,
meet the requirements of a well functioning capital market and are implemented
consistently across the world?
5. Is the standard-setting process currently in place structured in such a way to ensure
the quality of the standards and appropriate priorities for the IASB work programme?
The CAC thinks the current standard-setting process is almost appropriate and thatno major structural reforms are required. However, the CAC proposes the following two3

improvements. The first is to further expand outreach efforts before putting out official
proposals. In the past, some of the proposals in the discussion papers were completelyabandoned or reversed. The IASB's flexibility to respond to comment letters should behighly commended but, at the same time, the necessity also reveals that pre-proposalpreparations, including outreach and field tests, are not always adequate. The second
proposal is to disseminate information gathered from outreach activities as soon as ispractical. Although outreach activities are extremely important, it is hard for
non-participants to know what has been discussed. Information should be shared byvarious constituents.
6. Will the IASB need to pay greater attention to issues related to the consistent
application and implementation issues as the standards are adopted and implemented
on a global basis?
The CAC thinks the IASB needs to pay greater attention to consistent applicationand implementation issues. As each country and region in the world has its own issues
and background, it is unavoidable that a certain ‘range’, so to speak, is formed in regard
to interpretation of each individual standard. However, if the range became too wide,
the IFRSs would lose credibility as a single set of global standards. The CAC feels it
may be practical to give certain discretion in interpretation to local standard setters. As
the IFRSs are being adopted in more countries and regions, monitoring whether local
interpretations are excessive or not would also be an important mission for the IFRSF.
Financing: how should the organisation best ensure forms of financing that permit it
to operate effectively and efficiently?
7. Is there a way, possibly as part of a governance reform, to ensure more automaticity
of financing?
It is of considerable concern that some, or rather many, countries and regions are notpaying their dues. Some CAC members have even asserted that free riders’representation should be limited in one way or another. The first thing the IFRSF can do
now is to explicitly stipulate “making every effort that the countries and regions aTrustee represent are paying dues” as an important performance benchmark forTrustees.
Notwithstanding the various issues in each country/region, the stock exchanges are
direct beneficiaries of the global adoption of a single set of high quality accounting

4standards, as they expect to see more active and voluminous trading. Therefore,development of a scheme to impose a small broad-based levy through the exchanges
should be encouraged. In Japan, for example, the Tokyo Stock Exchange encourages
listed companies to be members of the Financial Accounting Standards Foundation anda portion of membership fees is contributed to the IFRSF. Another possible way tosecure stable income for IFRSF/IASB could be to develop an IFRS education programand use the proceeds for day-to-day operations.
If you have any questions or need further elaboration, please do not hesitate to contact
Sei-Ichi Kaneko, Executive Vice President, SAAJ (s-kaneko@saa.or.jp).
Sincerely yours,

Keiko Kitamura
ChairCorporate Accounting Committee

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