8 April 2011

Mr. Masamichi Kono
Acting Chairman
IFRS Foundation Monitoring Board
Dear Mr. Kono:
re: Comments on Consultative Report on“The Review of the IFRS Foundation’s Governance”
The Corporate Accounting Committee (CAC) of the Securities Analysts Association ofJapan (SAAJ) is pleased to comment on Consultative Report on “The Review of the IFRSFoundation’s Governance” put out by the Monitoring Board. The SAAJ is a not-for-profit
organization providing investment education and examination programs for securities
analysts. Its certified members number 24,000. The CAC is a standing committee of theSAAJ composed of 14 members, most of whom are users including equity and creditanalysts, and portfolio managers, while a few others are academicians and publicaccountants. The CAC writes comment letters to global standard setters, including theInternational Accounting Standards Board (IASB) and Accounting Standards Board ofJapan (ASBJ), and exchanges opinions with organizations including the ASBJ and theFinancial Services Agency.
General Comments
The CAC greatly appreciates the efforts of the Monitoring Board in conducting acomprehensive and detailed review of governance by the IFRS Foundation. The review
findings are reported in the Consultative Report in which the CAC finds a number ofreasonable and constructive proposals which should be adopted in the action plan to bepublished in the third quarter of 2011. On the other hand, some proposals would result in
expanding the authority of the Monitoring Board to such an extent that would effectively
change the current three-tiered governance structure into a two-tiered one––the CAC
opposes these proposals from the viewpoint of protecting IASB independence. Some otherproposals, including separation of the roles of the IASB chair and the CEO of the IFRSFoundation, and establishing a permanent secretariat for the Monitoring Board, excessively
emphasize organizational formality––the CAC also opposes these proposals in view of theresulting inefficiency and higher costs. Following are our answers to specific questions.

1Question 1:- Do you agree with the proposal to urge concrete efforts to deepen the pool ofcandidates for IASB membership from diverse geographical and professional
backgrounds? Please provide reasons for your agreement/disagreement.
The CAC thinks IASB board members are currently well diversified in terms of bothregional and professional background. To secure this diversity going forward, it isreasonable to deepen the pool of candidates.
Question 2:- Do you agree with the proposal to separate the roles of the IASB Chair and the CEO of
the IFRS Foundation, and if so would you have suggestions on how to formalize this?
Please provide reasons for your agreement/ disagreement.
The CAC opposes this proposal. The IASB and the IFRS Foundation are still small
with only about 120 staff in total. Separation of the IASB Chair and CEO of the IFRSFoundation would only induce inefficiency and higher costs.
Question 3:- Do you agree that clearer division of responsibility between staff dedicated to the IASB
operations and staff dedicated to the Foundation’s administrative and oversightfunctions should be considered, and if so would you have suggestions on how toformalize this? Please provide reasons for your agreement/disagreement.
Again, the CAC opposes the proposal. As mentioned under Question 2 above, the CAC
thinks that being excessively sensitive to the division of responsibility between the twosmall organizations would result in inefficiency and higher costs.
Question 4:- Please provide comments on any aspects of Trustee composition or appointments thatyou believe the Monitoring Board should consider.
The CAC is concerned that currently the Trustees have fewer representatives fromfinancial statement users compared to IASB members. In order to properly evaluate IASB
performance, a certain number of Trustees should have experience in analyzing financial
statements as users. It is recommended that the Monitoring Board take this point into
consideration when approving future Trustees.
Question 5:- Do you agree with the proposal to provide increased transparency into the process for2

Trustee nominations? Please provide reasons for your agreement/ disagreement. To
what extent should the Monitoring Board be involved in the nomination process?
- Do you agree that further clarification of criteria for the Trustees’ candidacy would
help support confidence of the stakeholders? Please provide reasons for youragreement/disagreement.
The CAC agrees with the proposal. As the Board of Trustees plays a core role in thethree-tiered governance structure of the IFRS family, increased transparency regarding theTrustee nomination process would contribute to enhancing IFRS credibility. As approvalof Trustee nominations is an important responsibility of the Monitoring Board, it should beinvolved in the nomination process more actively than now. The Trustee nomination
process has hitherto not been clear. Hence, further clarification of candidacy criteria wouldhelp enhance stakeholder confidence.
Question 6:- Should the membership of the Monitoring Board continue to be confined to capital
markets authorities responsible for setting the form and content of financial reporting inrespective jurisdictions?
- Do you agree with the proposal to expand the Monitoring Board’s membership byadding a mix of permanent members ([four]) representing primarily major emerging
markets and rotating members ([two]) from all other markets? Please provide reasonsfor your agreement/disagreement. How should the major markets be selected? Should ajurisdiction’s application of IFRSs and financial contribution to standard-setting play arole?
- Do you agree that rotating members should be selected through IOSCO? Pleaseprovide reasons for your agreement/disagreement.
The CAC believes that membership of the Monitoring Board should continue to beconfined to the capital market authorities responsible for setting the form and content offinancial reporting. The mission of the Monitoring Board is to promote the continued
development of IFRS as transparent and decision useful global accounting standards,
whilst preserving IASB independence. Only capital market authorities can assume thismission. Expansion of the Monitoring Board’s membership should be designed in such away that it would not hinder efficient operation of the Board. In selecting new members, itis obvious that a jurisdiction’s application of IFRSs and its financial contribution to
standard setting are important criteria, but we think that whether a jurisdiction’s capital
markets are transparent and liberalized should also be considered. Selecting rotating3

members through IOSCO is rational as the entity comprises capital market authorities fromaround the world which are responsible for setting the form and content of financial
reporting.
Question 7:- Do you agree that the Monitoring Board should continue to make its decisions byconsensus? Please provide reasons for your agreement/disagreement. Are there any
types of decisions taken by the Monitoring Board for which voting other than byconsensus (for example, by qualified majority) may be appropriate? If so please describe
why and suggest an appropriate voting mechanism.
In view of the expected expansion of the Monitoring Board’s membership, the CAC
has some concern regarding efficient decision making if the Board continues to make alldecisions by consensus. The CAC is specifically concerned that decision making byconsensus might stalemate approval of Trustee appointments which is the most important
responsibility of the Board. Thus, the CAC proposes allowing Trustee approval by
qualified majority.
Question 8:- To ensure increased involvement of public authorities and other internationalorganizations in Monitoring Board activities, do you support the Monitoring Board (a)expanding the number of Monitoring Board observers, (b) holding more formalized
dialogue, or (c) establishing an advisory body, and on what basis? What should be thecriteria for selecting participants?
Only two years have passed since establishment of the Monitoring Board and therehave been no serious problems. Hence, the CAC does not think there is any need to expand
the Board’s organization except for a limited increase in members (see our answer toQuestion 6 above). Presently, the Basel Committee on Banking Supervision (BCBS) is anobserver of the Board. Being a prudential regulator as opposed to a capital market
authority responsible for setting the form and content of financial reporting, the BCBS is
not eligible to be a member of the Monitoring Board. However, as banking is an importantindustry which settles financial transactions in an economy, there is some rationale for theBCBS to be an observer. On the other hand, the CAC sees no need for additional observers.
Establishing an advisory body simply sounds like ‘gilding the lily’. The CAC supports
holding more frequent dialogue as it would help enhance visibility of the Board (see ouranswer to Question 10 below), but prudent consideration is needed to ‘formalize’ suchdialogue.

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Question 10:- What are the appropriate means and venues for the Monitoring Board to enhance thevisibility and public understanding of its activities?
Although the Monitoring Board is already a member of the IFRS family, its objectives
and activities are not fully appreciated by the stakeholders. This is partly because theBoard is quite a new organization, but the real issue is that the Board is literally invisible.
Taking every opportunity, Monitoring Board members should directly publicize the visionand raison d’être of the Board to the constituents. The round table discussion of theConsultative Report is the first opportunity of direct contact. The Monitoring Board and its
members should become more than just names through direct contact including speeches
and lectures at seminars and conferences, outreach activities, and by making a portion ofBoard meetings public.
Question 11:- Do you believe that the current arrangements for Monitoring Board involvement in theIASB’s agenda-setting are appropriate, or should the Monitoring Board have an explicit
ability to place an item on the agenda, or would you consider other alternatives thatwould enhance the Monitoring Board involvement in the IASB agenda setting? Pleaseprovide reasons.
The CAC believes that current arrangements for Monitoring Board involvement inIASB agenda setting are appropriate and that no changes are required.
Question 12:- Do you have concrete suggestions on how the Monitoring Board or the Trustees could
encourage a move towards a more stable and independent funding model?
The current situation where many countries and regions are not paying their dues to theIFRS Foundation is a serious issue threatening continuation of the development of highquality accounting standards. The first thing the IFRS Foundation could do is to explicitly
stipulate that an important performance benchmark for a Trustee is that the country/region
he/she represents is paying dues.
Question 13:- Do you believe that the Monitoring Board should have a more prominent role in theselection of the IASB Chair? Do you agree with the proposal that the role include
involvement in establishing a set of publicly disclosed criteria for the Chair, andassessment of a short list of candidates against those criteria? Please provide reasons.

5- Do you believe that the Monitoring Board should be given any further, specific role inthe selection of the IASB Chair? In particular, should the Monitoring Board approve
the Trustees’ final selection? Please provide reasons.
The CAC supports the current structure where the Monitoring Board approves
nomination of Trustees, and the Trustees nominate IASB members including the Chair.
Practically, as long as the Monitoring Board continues serious dialogue with the Trustees,
the Trustees will not select an IASB Chair who is not acceptable to the Monitoring Board.
The CAC agrees with the proposal for the Monitoring Board to be involved in establishinga set of publicly disclosed criteria for the Chair.
Question 14:- Do you agree that the Monitoring Board’s responsibilities should explicitly include
consultation with the Trustees as they further develop the framework to ensure properbalance in the composition of the IASB? Please provide reasons for youragreement/disagreement.
The CAC agrees with the proposed consultation with the Trustees as long as it islimited to the framework and does not include involvement in appointment of specificmembers.
Question 15:- Do you agree with the proposal to consider establishing a permanent secretariat for theMonitoring Board to support its increasing roles in overseeing the governance of thestandard-setter? Would you support this proposal even if it would require additional
financial contributions from stakeholders? Please provide reasons.
As its very name defines, the Monitoring Board’s commission is just to monitor, not toexecute. Hence, there is no need for a permanent secretariat.
Question 9:- Do you believe that the current arrangements for the standard-setting processadequately ensure the appropriate involvement of all relevant stakeholders and that all
relevant public policy objectives are taken into account? Please provide reasons for youragreement/disagreement.
The CAC appreciates the IASB’s enhanced outreach activities. However, one problem
is that it is hard for non-participants to know what has been discussed. Information
gathered through outreach activities should be immediately disseminated to theconstituents.

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Question 16:- Do you agree with the need for regular reviews, and the interval of five years as abenchmark? Should the reviews be aligned with the timing of the Foundation’s
mandated Constitution reviews? Please provide reasons for youragreement/disagreement.
The CAC agrees with the regular reviews and that they be aligned with theFoundation’s reviews. This would be an excellent opportunity for dialogue between theMonitoring Board and the Trustees and to exhibit unity within the IFRS family.
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
Chair
Corporate Accounting Committee7