To カジノシークレット 銀行出金nternational Organization of Securities Commissions (IOSCO)

Keidanren appreciates the opportunity to submit public comments on カジノシークレット 銀行出金uot;Consultation on Goodwillカジノシークレット 銀行出金uot; (hereinafter カジノシークレット 銀行出金uot;Public Consultationカジノシークレット 銀行出金uot;). Our comments are as follows.

[General]

Question 1:

• Working to resolve the issue that the recognition of impairment losses on goodwill is カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; (hereinafter the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue) only by improving the impairment test and related disclosure lacks effectiveness and efficiency and is not rational. To begin with, a portion of the monitoring metrics and other information used in the impairment test is non-financial information and should inherently be disclosed outside of the framework of financial statements. For a fundamental resolution, an improvement of the カジノシークレット 銀行出金uot;subsequent accounting for goodwillカジノシークレット 銀行出金uot; is essential, and the reintroduction of amortisation (that is, the カジノシークレット 銀行出金uot;amortisation and impairment approachカジノシークレット 銀行出金uot;) is the best solution.
• Regarding the カジノシークレット 銀行出金uot;subsequent accounting for goodwill,カジノシークレット 銀行出金uot; the IOSCO Public Consultation takes the present カジノシークレット 銀行出金uot;impairment-only approachカジノシークレット 銀行出金uot; as a given and seeks a solution for the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue only by improving the impairment test and related disclosure. The necessity of revising the カジノシークレット 銀行出金uot;subsequent accounting for goodwill,カジノシークレット 銀行出金uot; which is essential for a fundamental resolution of the issue, should be mentioned once again.

[Questions for Issuers]

Question 16:

• There are limits to resolving the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue by improving the impairment test. For the following reasons, the only rational method of resolving the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue is the カジノシークレット 銀行出金uot;amortisation and impairment approach.カジノシークレット 銀行出金uot; We strongly request the reintroduction of the amortisation of goodwill.
  (Reasons)
  1. 1) Under the current impairment-only approach, impairment losses on goodwill are not recognized on a timely basis. As previously examined in the IASB Discussion Paper カジノシークレット 銀行出金uot;Business Combinations?Disclosures, Goodwill and Impairmentカジノシークレット 銀行出金uot; (December 2020), the main reason is that the shield effect of the headroom makes it difficult to identify part of goodwill which should be impaired. By reintroducing amortisation, it will become possible to expense an appropriate amount of goodwill on a timely basis. (Resolution of the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue)
  2. 2) As goodwill is a part of investment costs and is mainly composed of technological capabilities, know-how, customer base and human resources, its value depreciates due to technological innovation, market changes, retirement or transfer of personnel, etc. If part of goodwill lasts indefinitely, it should normally be recorded as an intangible asset with indeterminate useful life. (Depreciation of goodwill)
  3. 3) As goodwill is a cost incurred to acquire businesses, it should be allocated over the period when the benefits of the acquisition (such as revenue and cost reduction) are recognized. By amortising goodwill, net profit of a company after acquisition is more appropriatelyrecorded, leading to appropriate understanding of the results of カジノシークレット 銀行出金nvestment. (Appropriate understanding of investment results)
  4. 4) The カジノシークレット 銀行出金uot;amortisation and impairment approachカジノシークレット 銀行出金uot; enables business management which comprehensively takes into account profit, cost and future impairment risk while keeping in mind the recovery of the investment. This will impose certain discipline on management and contribute to sustainable growth of a company. (Securement of disciplined corporate management)
  5. 5) As the カジノシークレット 銀行出金uot;amortisation and impairment approachカジノシークレット 銀行出金uot; considers the necessity of impairment by comparing the book value of goodwill, which reflects aged depreciation of goodwill, with the recoverable value, more appropriate amount of impairment is recognized on a timely basis. (Timeliness of impairment recognition)
  6. 6) Amortisation reduces risk and probability of impairment. The カジノシークレット 銀行出金uot;amortisation and impairment approachカジノシークレット 銀行出金uot; is an approach with excellent cost-benefit. (Cost-benefit perspective)
  7. 7) There is the opinion that カジノシークレット 銀行出金uot;for amortisation it is difficult to estimate the useful life of goodwill and the patterns in which goodwill diminishes,カジノシークレット 銀行出金uot; but the analysis and grounds are not sufficiently presented. It is possible to recognize the useful life of goodwill and the patterns in which goodwill diminishes, and the difficulty of the recognition is not so different from that of depreciation of tangible fixed assets. (Estimate of useful life and pattern)
• Regarding the straight-line amortisation of goodwill, Keidanren has consistently advocated for the reintroduction of amortisation. According to quantitative surveys conducted by the Accounting Standards Board of Japan (ASBJ) in 2016 and in 2020, the outstanding amount of goodwill has been on an increasing trend since the impairment-only approach was applied by international standards. Given this trend, resolving the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue is an urgent issue, and we recognize that there is a growing need to reintroduce amortisation in order to expense an appropriate amount of goodwill on a timely basis.
• The reintroduction of straight-line amortisation will eliminate most of the concerns that companies do not recognize impairment losses on goodwill on a timely basis. In particular, the issue that impairment losses on goodwill are not recognized on a timely basis due to the shield effect of the headroom under the カジノシークレット 銀行出金uot;impairment-only approachカジノシークレット 銀行出金uot; will be largely resolved.

Question 17:

• We believe that fundamentally resolving the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue through improvement of disclosure is extremely difficult. We are concerned that at many companies, requiring additional disclosure would impose additional workload. If additional disclosure requirements are set, the cost-benefit of the intended effect of the improvements from the disclosure requirements and the workload on the part of preparers and others should be thoroughly analyzed and examined.
• Most of the information concerning goodwill is commercially sensitive, and depending on the disclosed information, competitive disadvantage could emerge if this becomes reference information for competing companies. We have strong concerns that the expected effect might not be realized, leading to impairment of corporate value. As a result, because the information which can be disclosed without impairing corporate value is extremely limited, this will not be useful disclosure for investors, and setting disclosure requirements that impair corporate value is not desirable to investors. Consequently, we cannot agree with the opinion カジノシークレット 銀行出金uot;IOSCO members think that commercial sensitivity should not prevent companies from disclosing information about management's objectives for an acquisitionカジノシークレット 銀行出金uot; (Paragraph 2.3.2, third item) in the IOSCO Public Consultation document.
• In addition, it is impossible to identify and verify items and amounts of the synergies of the combined business (including accurate understanding of whether those synergies came from business combinations or were achieved regardless of business combinations) empirically. Because it is difficult to objectively and clearly define each synergy and カジノシークレット 銀行出金nformation provided varies depending on the definition by each company, disclosure that is comparable among companies is extremely difficult. Because we also believe that it is difficult to audit the validity of the amounts, these are not appropriate as the notes to the financial statements. Also, カジノシークレット 銀行出金tems that are expected to be improved by the use of external experts are extremely limited, and this will not lead to a fundamental resolution.

Question 18:

• Because the current disclosure requirements stipulated in IAS 36 are already at a substantial level within the scope that can be disclosed by preparers, there is almost no room for improving the カジノシークレット 銀行出金uot;too little, too lateカジノシークレット 銀行出金uot; issue by expanding disclosure. From the perspective of balance between the workload of preparers and the expected effect of expanding disclosure as well, working to resolve the issue by expanding disclosure is not efficient.
• Disclosure regarding external experts is unnecessary. At an impairment test, auditors tend to uniformly ask company executives to appoint external experts in order to eliminate subjectivity. Considering the significant role that the external experts play in effectively supporting audit procedures, KAM is the best place to disclose engagement of external experts. Additionally, from the perspective of reducing workloads on preparers, it is necessary to limit the engagement of external experts to highly challenging impairment tests.

Question 19:

• When impairment tests are implemented, a lot of commercially sensitive information including various assumptions and monitoring metrics based on future business strategies are handled as input information. As stated in Question 17, information that can be disclosed without impairing corporate value is extremely limited, and the approach of resolving related issues by expanding disclosure of カジノシークレット 銀行出金mpairment test is not efficient.