Keidanren welcomes the opportunity to comment on the proposed Due Process Handbook. We submit our comments below in the hope that this update will enhance the standard-setting due process of the IASB and the IFRS Interpretations Committee in a manner contributing to building a stable platform for standards development, as we requested in our comment letter on Agenda Consultation 2011 last year.

Question 1

We support the inclusion, as the clarification of the oversight function and responsibilities of the Due Process Oversight Committee (DPOC) will increase transparency in the process it follows. However, we request that consideration be given to the following points that have inconsistencies and therefore require amendment:

• The scope of the roles and responsibilities of the DPOC is inconsistently defined as "throughout all development stages of IFRSs" in paragraph 2.4, "the standard-setting activities of the IASB" in paragraph 2.8, and "throughout the development of an IFRS or an Interpretation" in paragraph 2.9. Nevertheless, it is evident from the proposed handbook that the IASB intends to have the DPOC oversee all the work related to standards development, including research programs carried out prior to agenda setting, and we completely agree with this approach. Accordingly, the phrases in paragraphs 2.4, 2.8, and 2.9 that are inconsistent with each other should be revised, for example, into "all the work related to standards development (including research programs and post-implementation reviews)."

• Whilst paragraph 2.8 stipulates that the DPOC "regularly" reviews the IASB's standard-setting activities, paragraphs 2.7 and 2.10 use the wording "operate in a manner that is timely" and "report ... in a timely manner," respectively. Given its mission, the DPOC should be required to review the IASB's standard-setting activities in a timely manner. Hence, "regularly" in paragraph 2.8 should be replaced with "in a timely manner."

Question 2

We agree with the proposal that due process procedures to be followed at each step of a project be published on the website, as this will enhance transparency of the due process. However, we request that attention be paid to the following matters:

• It is not sufficient to simply enumerate due process procedures to be followed at each step of the standards development process. Disclosure should also be made on whether consultations held at each stage were reflected in the final standard and, if not, why they were not reflected.

• We request that Appendix 4 include another table that clearly describes how the feedback received at the agenda consultation was summarized and used for setting the direction.

• In addition to the table format, diagrams (e.g., flowcharts) and other formats that are visually more easily understood are employed for disclosure.

Question 3

Firstly, we agree with the distinction between narrow-scope projects and comprehensive projects, because a framework that enables swift and flexible responses over a short period of time (i.e., narrow-scope projects) will be effective in dealing with a standard that can be improved by reviewing specific aspects only.

Secondly, we also agree with the introduction of a separate research program. Such a program will allow the IASB to seek opinions from a wide range of market participants before making the issue an agenda item. This will help the IASB to avoid wasting resources by returning to the beginning of the standards development process after the project reaches later stages.

However, we request that the following issues be considered:

• There are some special cases where conducting research in advance is not needed in order to develop standards urgently, for instance, to address financial crises. Despite that, the proposed handbook does not provide a clear distinction between the cases that require research in advance and the exceptional cases that do not. To avoid the exception from being abused, the handbook should clearly stipulate the conditions under which research in advance is deemed unnecessary.

• While paragraph 4.17 provides that "a research paper ... should include a clear statement of the extent of the IASB's involvement in the development ... of the paper," the paragraph continues to state that "in some cases the IASB will not have discussed the paper in a public meeting and will not, therefore, have developed any views on the matters set out in the paper." Yet, we consider it vital for the IASB to express its views as they indicate predictability in standards development. As such, the IASB's decision on whether to express its views should not depend solely on whether or not it has discussed the paper in a public meeting. Instead, the criteria for the IASB to decide whether to express its views should be clearly stipulated, and if the IASB decides not to express its views on a research paper, the reason should be specified in the paper.

Question 4

We agree with the first proposal that would increase the minimum comment period for exposing the draft of a rejection notice for an Interpretation from 30 days to 60 days, as this will enhance due process. In addition to this revision, we also request that comments on such draft rejection notices be published on the website in the same manner as comment letters on IFRS exposure drafts.

On the other hand, we oppose the second proposal that would reduce the minimum comment period for a revised exposure draft from 120 days to 60 days, as this will lead to the deterioration in the due process. Especially, in non-English-speaking regions where a translation process is required, a comment period of only 60 days may be too short to allow stakeholders to prepare comments even if the proposed amendment is narrow in scope. Furthermore, chief accountants and chief financial officers may find it difficult to submit comments if the comment period coincides with their busy season, such as when financial statements are finalized. For these reasons, we firmly believe that the minimum comment period for a revised exposure draft should not be reduced from 120 days.

For the same reasons, we request that reconsideration be given to the following three cases in which the IASB is permitted to shorten a comment period:

• Paragraph 4.20 concerning comment on a discussion paper : The minimum period for comment on a Request for Information is 60 days, but if the information request is narrow in scope and urgent the IASB may set a shorter period.

• Paragraph 6.7 concerning comment on an exposure draft: The minimum comment period is normally 120 days, but if the matter is narrow in scope and urgent a comment period of no less than 30 days may be set.

• Paragraph 6.8: In exceptional circumstances, the IASB may reduce a comment period below 30 days.

Question 5

1. (1) Investors and Other Users of Financial Reports (paragraphs 3.45-3.47)
   These paragraphs obligate the IASB to take additional steps to consult investors on proposals for new IFRSs and other matters on the grounds that investors tend to be underrepresented as submitters of comment letters. In the development of IFRSs, it is more important to balance other market participants' opinions with investors' opinions. We believe that corporate preparers' point of views are useful in the development of IFRSs, because companies can contribute to the robust development of IFRSs not only by the practical views as preparers, but also by the useful opinions as users of financial statements. We request that the IASB should increase broader meetings where market participants, including corporate preparers, could participate.

2. (2) Sunset Reviews
   To date, there have been many instances where projects added to the IASB's work programs had subsequently not progressed as planned. Continuing fruitlessly such projects over a long period of time would undermine predictability of work programs for market participants, and waste standards development resources. The handbook should therefore clearly stipulate that, when a project is significantly behind the schedule set in the original work program, procedures will be initiated to determine whether or not to discontinue the project (sunset reviews).

3. (3) Information on the IFRS Foundation Website (paragraph 3.33)
   While the paragraph sets out that work programs should be "updated periodically," we believe that periodic update alone does not ensure full information disclosure and thus that "updated periodically" should be revised to "updated in a timely manner." At the same time, it should be noted that frequent update, even if it is timely, may undermine predictability for market participants. In light of such risk, work programs should only be published after thorough examination and due authorization by the IASB. We request that this point also be specified in the handbook.

4. (4) The assigned IASB Members (paragraph 3.39)
   The proposed handbook sets out that, for major projects, the Chair of the IASB assigns specific IASB members to the project. This rule is not clear enough to eliminate the concern that the opinions and views of the specific the IASB members may be directly reflected in the staff paper they are involved in. To ensure that this concern will not become reality, we request that, at least, the following statement be added to the handbook: "The assigned IASB members must prevent their personal views from being reflected in any staff paper to maintain a neutral stance."

5. (5) A National and Regional Network (paragraphs 3.48-3.51)
   We believe that a variety of feedback from stakeholders in Japan and other Asian jurisdictions helps the IASB develop more useful standards. We therefore ask the IASB to make effective use of the Asia-Oceania liaison office to be opened in Japan for various purposes, for example drafting IFRSs and implementing field work.

6. (6) Completion of Deliberations (paragraph 6.24)
   The proposed handbook describes the steps to be taken before balloting when the IASB publishes major amendments without reexposure. We however consider it insufficient for the IASB to merely explain why reexposure is not necessary. We request that the steps of "consulting with and obtaining approval from the DPOC" be added as a more cautious approach.

7. (7) Securing Preparation Period after Standard Finalization (Appendix 4)
   A table in Appendix 4 "Due Process Protocol" specifies that the IASB sets an effective date for the standard, "generally providing at least a year." But, it should be noted that, in some cases, implementing IFRSs requires meticulous preparations, especially in the case of a standard introducing entirely new concepts that have never been implemented in any country. We request that, in such cases, the IASB provide preparers with a sufficient period of time necessary to understand the standard and prepare for the implementation.

8. (8) The proposed handbook sets out that the agenda consultation takes place every three years. We are, however, concerned that holding the agenda consultation and setting new IASB activity policies every three years may hamper the IASB's effort to develop standards in a stable manner. In view of such risk, the IASB should consider operating its activities based on the agenda consultation process on a more stable and long-term basis.

9. (9) To improve effectiveness of the handbook, it should more clearly specify the steps to be followed in the event that there is a deficiency in the procedures set forth in the handbook.