August ABAC comments on the IASB public consultation “Conceptual Framework for Financial Reporting”

APFF: Public-private collaboration in developing financial systems Importance of regional public-private collaboration: –Legal and regulatory frameworks –Financial market infrastructure –Financial market integration APFF: informal, inclusive and advisory public-private platform for collaboration in the development of common strategies for developing sound, efficient and integrated Asia-Pacific financial markets –Governments and regulatory bodies –Private sector –International organizations (IFIs, SSBs, others) APFF (Asia Pacific Financial Forum) 2

1)A pathfinder initiative to develop credit information sharing systems 2)A pathfinder initiative to improve the legal and institutional architecture for security interest creation, perfection and enforcement and related workshops 3)Dialogues on regulatory issues in trade and supply chain finance 4)Workshops on emerging facilitators of trade and supply chain finance 5)A pathfinder initiative to develop classic repo markets 6)Workshops to develop strategies to improve legal and documentation infrastructure for the development of OTC derivative market 7)Self-assessment templates on information for capital market investors 8)ARFP (Asian Region Funds Passport) support initiative 9)Workshop series to develop an enabling Asia-Pacific securities investment ecosystem 10)Dialogue series on regulation and accounting issues impacting the long-term business of the insurance industry in Asia Pacific economies and longevity solutions 11)Collaboration with APEC Finance Ministers’ Process in promoting long-term investment, including infrastructure 12)Conference and workshop series on linkages on structural issues APFF Interim Report 12 Action Plans 3

Volatility in the balance sheet  Short-term fluctuation should be avoided Assets-liabilities interaction should be reflected for a wide range of products sold in the region Discount rate should reflect the business model Volatility in the income statement  The (optional) use of OCI for insurance liabilities and corresponding assets Accounting issues and high-level recommendations The proposed IFRS contain other significant issues for traditional long-duration products (complexity, consistency, transition requirements, and presentation) 4  ABAC comments to IASB/FASB on insurance contracts, October 2013  APFF 2014 Interim Report to the APEC Finance Ministers Annex H: Constrains on Promoting Long-Term Investment in the Asia-Pacific Region

 The IASB (International Accounting Standards Board) issued a public consultation paper on the Conceptual Framework for Financial Reporting, dated May 2015 (Comments to be received by 26 October 2015)  ABAC comments identify and address high-level issues and not intend to respond to all technical questions  ABAC comments focus on the issues relevant to the objective of the APFF to promote long term roles of the insurance and pension industry  Q13 Reporting items of income or expenses in other comprehensive income  Q14 Recycling  Q16 Business activities  Q17 Long-term investment 5 IASB Consultation and positions of ABAC comments

Q13 Reporting items of income or expenses in other comprehensive income The Exposure Draft proposes that income or expenses could be included in OCI, only if (a) the income or expenses related to assets and liabilities at current values; and (b) excluding those items from the statement of profit or loss would enhance the relevance of information.  The ABAC supports a wider use of OCI both in assets and liabilities to better reflect the long-term nature of the business;  Short-term fluctuations in the statement of profit or loss may distort the relevance of the information on performance for the period, where such fluctuations are irrelevant for predicting the cash flows of the entity;  Nevertheless, the use of OCI should be optional in order to avoid accounting mismatch between assets and liabilities;  The treatment of changes in estimated cash flows and that of discount rates should be consistent to reflect economic reality and to provide relevant and useful information to users; 6 Main issues and corresponding questions/responses

Q14 Recycling The Exposure Draft proposes a rebuttable presumption that items of income or expenses including in OCI in one period will be reclassified in to the statement of profit or loss in some future period (recycled), if doing so will enhance the relevance of the information.  The ABAC believes that items of income and expenses presented in OCI should be permitted to be recycled, since it often reflects how an entity conduct its business and leads to a faithful representation of the performance for the period;  It would also build a clearer linkage between financial performance and financial condition;  We are not persuaded why the recycling criteria are different for debt and equity instruments;  The absence of recycling of equity investments may dis- incentivize the institutional investors to engage in such investment as a possible unintended consequence arising from this inconsistency; 7 Main issues and corresponding questions/responses

Q16 Business activities The Exposure Draft does not include a general discussion on the role of a business model in financial reporting, but discusses how an entity conducts its business activities may affect (a) the unit of account, (b) the selection of a measurement basis, (c) presentation and disclosure, including the items of income and expenses in OCI.  The ABAC supports the view that financial instruments could be more relevant if standards reflect how an entity conducts its business;  Furthermore, consideration of the business model may provide a faithful representation of the economic reality and result in more relevant information;  It is also important to take into account the different development stage;  The application of prescriptive international standards may not ensure overall comparability or a level playing field, due to the existing diversity in the region and around the globe; 8 Main issues and corresponding questions/responses

Q17 Long-term investment The IASB disagree with the view that information needs may differ from those of short-term investors, and concluded that the Conceptual Framework contains sufficient and appropriate discussions of primary users and information needs, and appropriately address the needs of long-term investors. It also emphasizes that transparent financial reporting would promote long-term investment, and encouraging or discouraging investments with particular characteristics is not the role of accounting standards.  Short-term oriented economic valuation tends to capture the assessment with a snapshot do not necessarily provide useful information for long-term investors, who wish to determine such investments that are good in the long run, rather than appear good at a given moment. Short-term fluctuations may not be relevant to the entity’s capacity to meet long-term obligations. The interaction between assets and liabilities should be properly reflected;  Accounting standards which do not reflect the long-term nature of business activities would not provide transparency for long-term investors. As a result, it would dis-incentivize long-term investments; 9 Main issues and corresponding questions/responses

For more details on the APFF, visit mackglobe.com or Makoto Okubo, Nippon Life ABAC comments on the IASB public consultation “Conceptual Framework for Financial Reporting” ABAC comments on the IASB public consultation “Conceptual Framework for Financial Reporting” 10