The Japanese Institute of
Certified Public Accountants
4-4-1, Kudan-Minami, Chiyoda-ku, Tokyo 102-8264 JAPAN
Phone: +81-3-3515-1130 Fax: +81-3-5226-3355
e-mail: kigyokaikei@jicpa.or.jp
http://www.hp.jicpa.or.jp/english/
November 25, 2015
International Accounting Standards Board
30 Cannon Street
London EC4M 6XH
United Kingdom
Comments on the Exposure Draft Conceptual Framework for Financial Reporting
To the Board Members:
The Japanese Institute of Certified Public Accountants (“we” and “our”) appreciates the
continued efforts of the International Accounting Standards Board (“IASB” or “Board”)
on this project, and welcomes the opportunity to comment on the Exposure Draft
Conceptual Framework for Financial Reporting (“ED”).
We believe that this project is significantly important and we strongly support the
Board’s efforts for this project.
Meanwhile, we provided the following comments on Discussion Paper A Review of the
Conceptual Framework for Financial Reporting (“DP”) issued by the IASB in 2013
“ we believe that the Board should avoid completing the project without sufficient
considerations given to the basic concepts that should be the key focus of discussion
because of placing the priority on completing the project on time. This is because we are
afraid that the value of this project may be possibly undermined, if the revised
Conceptual Framework only follows the notions in the existing Standards or those
currently under development, or just reflect the contents of the existing Standards set
out by the Board, when the discussions may not sufficiently encompass the topics or
such topics may not be subject to thorough discussions. We believe that the revised
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Conceptual Framework should provide a base in developing any new Standards by the
IASB forward and addressing any wide-ranging issues, rather than justify the existing
IFRS.” However, we recognize that the IASB has further narrowed the scope of the
project than that for DP, emphasizing on completing the Conceptual Framework project
on time.
We are still concerned that the sufficient consideration may not have been given to the
basic concepts that should be the key focus of discussion, including definition of profit
or loss and classification of liabilities and equity. On the other hand, we are fully aware
that the IASB has been tackling key issues through other projects including “Research
Project on Financial Instruments with Characteristics of Equity”, “Disclosure Initiatives”
and “Research project to determine whether to add a project on performance reporting
into the respective agenda.”
Given the tough road ahead to shape the Conceptual Framework all together, we would
not negate the IASB’s intention to complete this Conceptual Framework project on time
by narrowing the scope and revisit it based on the outcome of the efforts for other
projects. Notwithstanding, if the IASB would take an approach to narrow the scope, we
believe that the IASB should clarify the issues identified through this project and any
areas that are not covered through this project such as definition of profit or loss, and
strongly recommend that the IASB should provide its policy on how the IASB would
address the topics about the Conceptual Framework in the future.
The following is our comments on the Questions to the ED.
Question 1—Proposed changes to Chapters 1 and 2
Do you support the proposals:
(a) to give more prominence, within the objective of financial reporting, to the
importance of providing information needed to assess management’s stewardship
of the entity’s resources;
(b) to reintroduce an explicit reference to the notion of prudence (described as caution
when making judgements under conditions of uncertainty) and to state that
prudence is important in achieving neutrality;
(c) to state explicitly that a faithful representation represents the substance of an
economic phenomenon instead of merely representing its legal form;
(d) to clarify that measurement uncertainty is one factor that can make financial
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information less relevant, and that there is a trade-off between the level of
measurement uncertainty and other factors that make information relevant; and
(e) to continue to identify relevance and faithful representation as the two
fundamental qualitative characteristics of useful financial information?
Why or why not?
Comment:
(a) We agree with the IASB’s proposed amendments.
We understand that referring to (management’s) stewardship within the discussion
of the objective of financial reporting does not conflict with the description in the
current Conceptual Framework. If any concern of misleading is raised without
explicit reference, we believe it useful to refer to management’s stewardship.
(b) We agree with the IASB’s proposed amendments provided that the relationship
between asymmetric prudence and neutrality would be clarified in Basis for
Conclusions.
We believe that clarifying the concept of prudence would contribute to converging
stakeholders’ diversity in practice in terms of prudence, which would ensure
consistent application in developing Standards by the IASB.
We understand that the term of prudence referred to this ED only encompasses
“cautious prudence” and does not refer to “asymmetric prudence.” Notwithstanding,
paragraph BC2.11 stated that the IASB thinks that not all the asymmetry is
inconsistent with neutrality. Thus, we are concerned that such statement may
possibly provide misleading interpretations on how “asymmetric prudence” is
treated in this ED. In view of that, we believe that the IASB should include certain
statement following the description above in the Basis for Conclusions, such as
“nevertheless, the IASB would not reflect the concept of asymmetric prudence in
the Conceptual Framework.”
(c) While we agree with the IASB’s proposed amendments, we suggest that the IASB
consider revising and modifying the description as below.
We believe it effective to explicitly state that a faithful representation represents a
substance of economic phenomenon to ensure one of fundamental qualitative
characteristics, in order to avoid placing too much emphasis on legal form.
For example, we note that in paragraph 38 of IFRS 15 ‘Revenue from Contracts
with Customers’ (“IFRS 15”) not only the transfer of legal title of an transfer but
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also customer’s physical possession or acceptance of an asset and the like is
indicated as the transfer of control of an asset. Then, we believe that the IASB’s
proposal would clarify that it is necessary to take into account a substance of an
economic phenomenon as well as its legal form in order to provide its faithful
representation.
While measurement uncertainty is described as factor affecting the “relevance” of
financial information in paragraphs 2.12 and 2.13 of the ED, we note that it would
also affect the “faithful representation” of financial information that is another
fundamental qualitative characteristics. For example, paragraph 2.19 describes the
accuracy of information and specifies an estimate of unobservable price or value as
sample which can be accurate and faithful representation. Accordingly, in order to
make it clear that measurement uncertainty including these cases refers to both
qualitative characteristics, we believe that the IASB should state in paragraph 2.19
that a representation of an estimate can be faithful even if measurement certainty
exists and that the description of the nature and limitation of a estimation to
properly would explain how measurement uncertainty relates to “faithful
representation”.
(d) We agree with the IASB’s proposed amendments provided that in-depth
consideration would be taken in using the term “trade-off.”
We often find cases where there is a trade-off between the measurement uncertainty
and other factors that make information relevant. For example, as described in
BC2.24(c), one piece of information may be of high interest to users of financial
statements, but subject to high measurement uncertainty. Notwithstanding, a
trade-off may not exist between the level of measurement uncertainty and other
factors that make information relevant in all cases, we suggest that the IASB
modify paragraph 2.13 using more general wording, such as “a trade-off may be
often identified between the measurement uncertainty and other factors that make
information relevant.”
(e) We agree with the IASB’s proposed amendments.
We believe that the usefulness of financial information would be ensured by
relevance and faithful representation.
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Question 2—Description and boundary of a reporting entity
Do you agree with:
(a) the proposed description of a reporting entity in paragraphs 3.11–3.12; and
(b) the discussion of the boundary of a reporting entity in paragraphs 3.13–3.25?
Why or why not?
Comment:
(a) We agree with the IASB’s proposed amendments.
For example, we may see certain cases where economic activities may not be
necessarily performed in a scope consistent with a legal entity, such as transaction
with third party through consolidated subsidiary or joint operation. We assume that
useful information on financial information of such economic activities would be
provided if a reporting entity is not limited to a legal entity,
(b) We agree with the IASB’s proposed amendments.
In order to provide a faithful representation of economic activities by the reporting
entity, it is necessary to describe a set of economic activities included within the
reporting entity. Thus, we agree with the proposal of this ED that the boundary of
the reporting entry should not limited to direct control (i.e. unconsolidated financial
statements), but include both direct and indirect control (i.e. consolidated financial
statements).
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Question 3—Definitions of elements
Do you agree with the proposed definitions of elements (excluding issues relating to
the distinction between liabilities and equity):
(a) an asset, and the related definition of an economic resource;
(b) a liability;
(c) equity;
(d) income; and
(e) expenses?
Why or why not? If you disagree with the proposed definitions, what alternative
definitions do you suggest and why?
Comment:
(a) We agree with the IASB’s proposed amendments.
The proposed definition of an asset has incorporated the concept of “economic
resource” that represents “a right that has the potential to produce economic
benefits” and deleted certain words implying the probability of generating inflows
of future economic benefits that had been included in the previous definition.
Consequently, certain transactions such as long option or ongoing R&D project
may be possibly recognized as assets even if future inflows of economic benefits
may not be predicted.
(b) We agree with the IASB’s proposed amendments.
As same as the proposed definition of an asset, “an economic resource” is defined
as “a right that has the potential to produce economic benefits” in the definition of a
liability and certain words implying the probability of generating inflows of future
economic benefits were deleted. Consequently, we believe that it makes clear that
liabilities may be recognized even if future outflow of economic benefits is not
probable in reality, such as stand ready obligation.
(c) We agree with the IASB’s proposed amendments.
Equity is defined as the residual interest in the assets of the entity after deducting
all its liabilities. We believe that such definition would help better understand its
classification and the resultant accounting treatment rather than directly define
equity to introduce other element(s).
(d)(e) We agree with the IASB’s proposed amendments.
We agree with the IASB’s view that that it is more effective, efficient and rigorous
to define assets and liabilities first, and to define income and expenses as changes
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in assets and liabilities, instead of trying to define income and expenses first and
then describe assets and liabilities as by-products of the recognition of income and
expenses (see paragraph BC4.3 (c)).
Question 4—Present obligation
Do you agree with the proposed description of a present obligation and the proposed
guidance to support that description? Why or why not?
Comment:
We agree with the IASB’s proposed description assuming that the practicability of the
requirements would be enhanced.
In this ED, an entity is considered to have a ‘present obligation’ (to transfer an
economic resource) if both of the two requirements including (a) the entity has no
practical ability to avoid the transfer and (b) the obligation has arisen from past events.
If the definition of obligation is limited to obligation that are unconditional and legally
enforceable instead of the requirement (a), such definition may not address certain
situations where many parties would consider a present obligation as practically
unconditional and information on the obligation that the entity does not have practical
ability to avoid the transfer of an economic resource is considered useful by users of
financial statements. Accordingly, we agree with the IASB’s proposed approach that a
“present obligation” is not limited to unconditional and legally enforceable obligation
and also includes obligation for which an entity’s ability to avoid the transfer of a (an
economic) resource is less practicable.
In addition, as described above, we believe that the IASB should clarify the range of
obligation as it has been extended beyond unconditional and legally-enforceable
obligation. For (b), it is set out that the obligation has arisen from past events. Thus, we
assume that it makes clear that the transfer of economic resources that do not arise from
past events, for example future operational costs arising from future business activities,
is not included in a present obligation.
Notwithstanding, we recognize that certain provisions to support practical application of
requirement (a) (i.e. paragraphs 4.32 - 4.35) have not been clearly defined in terms of
the situation assumed or magnitude of significance, which may possibly lead to
diversity in interpretation. For example, paragraph 4.32 described that “any action
necessary to avoid the transfer would cause significant business disruption or would
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have economic consequences significantly more adverse than the transfer itself.” Such
description may result in diversity in views, for example, what situation would be
assumed, and to what extent significant business disruption or significantly adverse
economic consequences would be assumed to happen. Accordingly, we believe that the
IASB should further clarify these provisions to support practical application of
requirement (a).
Question 5—Other guidance on the elements
Do you have any comments on the proposed guidance?
Do you believe that additional guidance is needed? If so, please specify what that
guidance should include.
Comment:
We believe that the IASB should enhance the guidance on the unit of account.
We note that paragraphs 4.57 - 4.63 of the ED have included the description about the
unit of account determined when developing Standards about recognition and
measurement, including examples of possible units of account and the factors that could
determine which unit of account to use (paragraph BC4.115) and we highly appreciate
that certain ways of thinking have been provided for discussion.
On the contrary, certain topics have not been discussed in the ED including:
 which cases would be considered appropriate when selecting one unit of account
for recognition and a different unit of account for measurement (paragraph 4.59);
 how the issue of unit of account is linked to the approach to use when derecognition
occurs; partial derecognition or full derecognition (paragraph BC5.58)
We recognize that what should be recognized as proper unit of account has been
frequently argued to date. We suggest that the IASB discuss and consider the approach
to aggregate rights and obligations to one unit of account in the Conceptual Framework.
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Question 6—Recognition criteria
Do you agree with the proposed approach to recognition? Why or why not? If you do
not agree, what changes do you suggest and why?
Comment:
We agree with the IASB’s proposed approach assuming that supplementary explanation
is added.
In certain cases, the relevant information may not be provided if item meeting the
definition of an element is recognized in the financial statements straightforwardly - we
assume that this is because inflow or outflow of economic benefits may not be expected
from the said element in reality. With respect to this issue, the IASB has specified one of
its contributing factor to make the information less relevant in paragraph 5.13(b) stating
that “if an asset or a liability exists, but there is only a low probability that an inflow or
outflow of economic benefits will result.” Then we believe that the IASB has provided
solution.
Assuming that this treatment is undertaken in practice, we suggest that the IASB add
supplementary explanation in the Conceptual Framework with respect to the low
probability of an inflow or outflow of economic benefits.
In addition, based on the description in paragraph 5.23 we understand that a faithful
representation is a necessary factor that should be taken into account when determining
whether to recognize an element. Nevertheless, we consider that the said description has
not provided clear explanation on how faithful representation serves as a basis for
considering new Standards and actually contributes to determination in standard-setting.
We believe that the IASB should provide additional explanation to this point.
Question 7—Derecognition
Do you agree with the proposed discussion of derecognition? Why or why not? If you
do not agree, what changes do you suggest and why?
Comment:
We agree with the IASB’s proposed amendments, provided that the IASB would clarify
the way to address when the two objectives of derecognition conflict with each other.
The existing Conceptual Framework has not defined derecognition and has not
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specified the cases when the assets or liabilities should be derecognized. We believe that
this ED would contribute to the consistent application in developing Standards by the
IASB by determining the objectives of derecognition.
We agree with the IASB’s proposal that accounting requirements for derecognition
should aim to represent faithfully both (a) the assets and liabilities (if any) retained after
the transaction or other event that led to the derecognition; and (b) the change in the
entity’s assets and liabilities as a result of that transaction or other event.
Notwithstanding, the way to address when these two objectives conflict each other has
not been clearly defined, and we believe that the IASB should clarify this topic.
Paragraphs 5.33 - 5.36 discuss modification to a contract based on whether such
modification adds rights and obligations that are “distinct from” those created by the
original terms of the contract. While we may consider that this approach is consistent
with the provisions for contract modifications and identifying performance obligations
in IFRS 15, we assume that the Board has not sufficiently discussed how this approach
is consistent with the provisions for the modification of the terms of financial assets and
financial liabilities and for derecognition in IAS 39 ‘Financial Instruments: Recognition
and Measurement’ and IFRS 9 ‘Financial Instruments’.
Question 8—Measurement bases
Has the IASB:
(a) correctly identified the measurement bases that should be described in the
Conceptual Framework? If not, which measurement bases would you include and
why?
(b) properly described the information provided by each of the measurement bases,
and their advantages and disadvantages? If not, how would you describe the
information provided by each measurement basis, and its advantages and
disadvantages?
Comment:
(a) N/A
(b) N/A
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Question 9—Factors to consider when selecting a measurement basis
Has the IASB correctly identified the factors to consider when selecting a
measurement basis? If not, what factors would you consider and why?
Comment:
We believe that the IASB should explicitly add the (management’s) stewardship in the
factors to consider when selecting a measurement basis.
Paragraph 6.10 of the DP explained that “the objective of measurement is to contribute
to the faithful representation of relevant information about the resources of the entity,
claims against the entity and changes in resources and claims, and about how efficiently
and effectively the entity’s management and governing board have discharged their
responsibilities to use the entity’s resources.” We agreed with this purpose of
measurement. Meanwhile, paragraphs 6.73 – 6.90 of the DP emphasized that subsequent
measurement of assets would be affected by the ways in which an asset contributes to
future cash flows of an entity. On the contrary, we suggested that the Board should
consider adding another objective that the stewardship to shareholders is discharged by
reporting the return to the invested capital by such shareholders, in other words
reporting profit that is the outcome to the capital contributed by the shareholders.
In order to avoid overlapping, this ED describes a link between measurement and the
objective of financial reporting in paragraph 6.49 instead of describing the objective of
measurement itself (See paragraphs BC6.39 – BC6.40).
However, the explicit reference to the relationship between the measurement and the
(management’s) stewardship has been deleted consequently. In addition, paragraph 6.54
emphasized that it is important to consider how that asset or liability contributes to
future cash flows when selecting a measurement basis. Nevertheless, in selecting a
measurement basis we continue to believe it important to consider (the management’s)
the stewardship to report the return to the invested capital, in other words reporting
profit that is the outcome to the capital contributed by the shareholders. Accordingly, we
suggest that the IASB consider explicitly adding report of fulfillment of (the
management’s) stewardship to shareholders as factors to be considered when selecting a
measurement basis.
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Question 10—More than one relevant measurement basis
Do you agree with the approach discussed in paragraphs 6.74–6.77 and BC6.68? Why
or why not?
Comment:
We believe that the IASB should clarify (identify) items to be recognized in profit or
loss, by providing the definition of ‘profit or loss’ or by other method.
We do not disagree to applying certain approach, as described in paragraph 6.76 of the
ED, that a measurement basis used to determine assets or liabilities in the statement of
financial position would be different from that to determine the related income or
expenses in the statement of profit or loss. However, we believe that such treatment
should be based on the precondition that items (income and expenses) to be included
and recognized in profit or loss should be clearly defined. In this regard, please see our
comments to Question 13.
Question 11—Objective and scope of financial statements and communication
Do you have any comments on the discussion of the objective and scope of financial
statements, and on the use of presentation and disclosure as communication tools?
Comment:
We believe that setting out the presentation and disclosure concepts in the Conceptual
Framework would be useful for the IASB to develop the consistent accounting policies
(Standards) in the area of presentation and disclosure that would contribute to
understanding of an entity’s financial condition and financial performance by user of
financial statements.
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Question 12—Description of the statement of profit or loss
Do you support the proposed description of the statement of profit or loss? Why or
why not?
If you think that the Conceptual Framework should provide a definition of profit or
loss, please explain why it is necessary and provide your suggestion for that
definition.
Comment:
We believe that the IASB should identify items to be included and recognized in profit
or loss, by defining profit or loss or by other method.
This ED has clarified that income and expenses included in the statement of profit or
loss are the primary source of information about an entity’s financial performance for
the period. In addition, the ED has stated that the total or subtotal for profit or loss
provides a highly summarized depiction of the entity’s financial performance for the
period. Hence this clarified the importance of the statement of profit or loss in the
IFRS-based financial statements. Notwithstanding, the emphasis on profit or loss as a
primary source of information for financial performance would become more relevant
only after items (income and expenses) to be included and recognized in profit or loss
are clearly defined. In this regard, please see our comments to Question 13.
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Question 13—Reporting items of income or expenses in other comprehensive
income
Do you agree with the proposals on the use of other comprehensive income? Do you
think that they provide useful guidance to the IASB for future decisions about the use
of other comprehensive income? Why or why not?
If you disagree, what alternative do you suggest and why?
Comment:
While we agree with the overall direction of this ED to place more emphasis on
importance of the statement of profit or loss, we believe that the IASB should define
‘profit or loss’ or, at least to provide a basis for identifying items (income and expenses)
to be recognized as ‘profit or loss.’
IASB concluded that a robust and appropriate definition of profit or loss would not be
feasible for the Conceptual Framework after discussing requests for defining profit or
loss. Instead, the IASB has included a presumption in the ED that all of income and
expenses will be included in the statement of profit or loss (paragraphs BC7.34 BC7.41). We understand that this presumption implies the IASB’s effort to more
emphasize importance of the statement of profit or loss and to clarity items to be
recognized in profit or loss, and we strongly support such direction. Nevertheless, we
believe that it would be necessary to clearly determine the items (income and expenses)
to be recognized in profit or loss in the Conceptual Framework in order to ensure
consistency in developing Standards.
We believe that it is most preferable to define profit or loss as financial performance.
For example, in the Paper ‘Profit or Loss/OCI and Measurement’ issued by the
Accounting Standards Board of Japan (“ASBJ”) in December 2013, the definition of
profit or loss has been proposed and stated that “profit or loss is the change in net assets
during a period except those changes resulting from transactions with owners in their
capacity as owners, whereby the recognised assets and liabilities comprising the net
assets are measured using measurement bases that are relevant from the perspective of
reporting an entity’s financial performance.” In addition, the ASBJ suggested describing
the nature of profit or loss as “representing an all-inclusive measure of irreversible
outcomes of an entity’s business activities in a certain period.” We believe that the
IASB may clarify what should be recognized as ‘profit or loss’ through discussion based
on such proposal.
On the other hand, we fully recognize the difficulty to set out the definition of profit or
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loss and to obtain consents from a wide range of stakeholders. To this end, in the
feedback to the DP we have commented that while the DP emphasizes the need for
profit or loss used by user or financial statements as measure, it does not provide clear
guidance for items (income and expenses) to be recognized as profit or loss. In order to
clarify the relevance of profit or loss as information, we believe that it would be
desirable for the Board to specify items that should be recognized in profit or loss, for
example by considering the definition of ‘financial performance’ that provides the basis
for distinguishing items that should be recognised in profit or loss from those
recognized in OCI. Given that paragraph 7.24(b) of this ED states that income or
expenses may be excluded from the statement of profit or loss only when the relevance
of the information in that statement is enhanced, we believe that the IASB may provide
a basis for distinction of items to be recognized in profit or loss and those to be
recognized in Other Comprehensive Income (“OCI”) by certain method, such as
identifying the cases where the relevance is enhanced.
Paragraphs BC7.33 - BC7.37 of the ED stated that based on the results of assessing the
current use of OCI in existing Standards there is no single conceptual basis that
underlies all of those cases and it is not feasible to distinguish items of income or
expenses to be included in the statement of profit or loss from those to be included in
OCI. Nevertheless, we believe that the Conceptual Framework may not have to
necessarily justify the current Standards; rather, if OCI is used in less-consistent way in
the current Standards, it would be more important for the IASB to provide a basis for
developing or modifying Standards in a more consistent way in the future.
We fully acknowledge that it is challenging to provide such basis and believe that the
IASB may tackle this issue through discussion at “Research project to determine
whether to add a project on performance reporting into the respective agenda” as
described in our comments above, rather than by providing conclusion within the
current Conceptual Framework project. We suggest that the IASB discuss on this topic
on an ongoing basis to build consensus on the items to be recognized in profit or loss.
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Question 14—Recycling
Do you agree that the Conceptual Framework should include the rebuttable
presumption described above? Why or why not?
If you disagree, what do you propose instead and why?
Comment:
For the time being, we basically agree with the IASB’s approach to rely on presumption
that any income or expenses recognized in OCI, if exists, would be recycled to profit or
loss in the future period. Notwithstanding, we believe that we should further discuss on
the rebuttable presumption in paragraph 7.27.
We recognize that the approach of the ED would be based on, in principle, that “the
amounts included in the statement of profit or loss are the primary source of information
about an entity’s financial performance for the period.” Consequently, such approach
would lead to the view that the amounts included in the statement of profit or loss
should represent, to the extent possible, items of income or expense exhaustively.
Therefore, such idea would result in the concept that no income and expenses should be
excluded from the cumulative amounts over time in the statement of profit or loss
permanently, unless there is a compelling reason to do so. Consequently, we believe that
it is reasonable for the IASB to include in the Conceptual Framework a presumption
that income and expenses included in OCI must subsequently be reclassified to the
statement of profit or loss, and we agree with the IASB’s proposal as the practical
expedient.
Given that we support the concept of recycling, we consider the presumption (that a
reclassification will occur) could be rebutted, but to a limited extent. In this regard,
paragraph 7.27 of this ED stated that the presumption could be rebutted if “there is no
clear basis.” Nevertheless, we are concerned that the term “there is no clear basis”
would possibly result in diversity in interpretation. Hence, we believe, as stated
repeatedly, that the IASB should define profit or loss, or at least to provide a basis for
identifying the items to be recognized and included in profit or loss.
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Question 15—Effects of the proposed changes to the Conceptual Framework
Do you agree with the analysis in paragraphs BCE.1–BCE.31? Should the IASB
consider any other effects of the proposals in the Exposure Draft?
Comment:
We agree with the IASB’s proposed amendments.
Question 16—Business activities
Do you agree with the proposed approach to business activities? Why or why not?
Comment:
We agree with the IASB’s proposal in that this ED does not include a general discussion
on the role of a business model in financial reporting but does discuss how its business
activities may affect key issues at the present. Nevertheless, we suggest that the IASB
should discuss on business activities of an entity on an ongoing basis.
This ED discusses how business activities affect (a) unit of account (paragraph 4.62
(a)(iii)), (b) selection of a measurement basis for an asset or a liability and the related
income and expenses(paragraph 6.54 (a) and (c) presentation and disclosure (whether to
include items of income and expenses in profit or loss or in other comprehensive
income) and we believe that the outcome of discussion would provide a useful view in
standard-setting. In addition, we agree with the IASB’s approach that this ED does not
include a general discussion on the role of a business activity in financial reporting but
does discuss how the business activities may affect key issues at the present.
Notwithstanding, in view that more than one business activity exists conceptually, we
do not recognize how and to what extent the IASB has discussed about the potential
outcome from combination of such business activities and corresponding set of
accounting standards. Thus, we believe that in-depth discussion on this topic would be
required. In addition, we would ask the IASB to continue discussion on the concept of
business activities assuming that it would further enhance the relevance of financial
information in standard-setting.
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Question 17—Long-term investment
Do you agree with the IASB’s conclusions on long-term investment? Why or why
not?
Comment:
We agree with the IASB’s proposal that the Conceptual Framework should not
explicitly refer to the business activity of long-term investment.
As described in paragraph BCIN.35, long-term investment and long-term financing is a
subject that has attracted a great deal of attention from governments in recent years.
Governments have indicated that encouraging long-term investment is one important
tool to promote economic growth. Consequently, we highly appreciate that, through the
efforts of developing this ED, the IASB considered whether the Conceptual Framework
would provide the IASB with sufficient and appropriate tools to enable it to consider the
questions specified in paragraph BCIN.35 when developing new Standards.
Notwithstanding, as described in paragraph BCIN.38, we are concerned that referring
explicitly to any particular business activity would inappropriately embed
Standards-level detail in the Conceptual Framework. In addition, given the fact that the
Conceptual Framework has not referred to other particular business activity to date, we
are concerned that there is no reason for the Conceptual Framework to refer solely to
this particular activity. Accordingly, we agree with the IASB’s proposal that that the
Conceptual Framework should not explicitly refer to the business activity of long-term
investment.
Question 18—Other comments
Do you have comments on any other aspect of the Exposure Draft? Please indicate the
specific paragraphs or group of paragraphs to which your comments relate (if
applicable).
As previously noted, the IASB is not requesting comments on all parts of Chapters 1
and 2, on how to distinguish liabilities from equity claims (see Chapter 4) or on
Chapter 8.
Comment:
No further comments.
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Yours faithfully,
Keiko Kishigami
Executive Board Member－Accounting Practice (IFRS)
The Japanese Institute of Certified Public Accountants
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