1. Update on IFRS Application in Japan Ikuo Nishikawa Chairman Accounting Standards Board of Japan February 23, 2011 2011 IFRS Conference in Taiwan

2. Agenda Current environment Convergence with IFRSs Activities for Application of IFRSs 1 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

3. Current Environment (1/2) “Opinion on the Application of IFRS in Japan (Interim Report)” (June 2009) Issued by the Business Accounting Council (BAC), an advisory body to the Commissioner of the FSA So-called as the “Roadmap” Voluntary application of IFRSs is allowed from the fiscal year ended March 2010 Allowed for consolidated F/S of Japanese listed companies who operate financial or business activities internationally Only 1 listed company used the voluntary application for the fiscal year ended March 2010 2 or more are expected to move to IFRS compliant for the fiscal year ended March 2011 2 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

4. Current Environment (2/2) Decision for mandatory application of IFRSs will be made around 2012 The mandatory application may start from 2015 or 2016, if the decision is made in 2012 Well converged Japan GAAP is essential to the adoption of IFRS The Interim Report recommend the ASBJ to continue and accelerate the international convergence of accounting standards 3 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

5. Convergence (1/3) Continue and accelerate the international convergence of accounting standards based on the “Tokyo agreement” with IASB in 2007 Items related to existing differences Aim to finalize by June 2011 Items related to the MoU between IASB and FASB To achieve convergence with IFRS, work closely to ensure the acceptance of the international approach in Japan when new standards become effective. 4 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

6. Convergence (2/3) ASBJ current projects Items related to existing differences Intangibles Business combinations (Step 2) Items related to the MoU between IASB and FASB Financial instruments Fair value measurement and disclosure Revenue recognition Leases Scope of consolidations Derecognition Financial statement presentation (Phase B) Liabilities and equity distinctions Post-employment benefits (Step 1, Step2) Items related to IASB’s projects other than those addressed in the MoU Insurance contracts Provisions Emission trading schemes Copyright © 2011 Accounting Standards Board of Japan All rights reserved. 5

7. Convergence (3/3) Applicability of IFRS to non-consolidated financial statements for listed companies Accounting treatment of non-consolidated F/S has been historically identical to those for consolidated F/S The policy may have a significant effect on tax consequences or in light of Company Act –Historically, three laws (Financial Instrument and Exchange Act, Company Act, Corporate Income Tax Law) prescribes financial accounting and reporting in Japan –Those three laws influences on each other in various ways although each has its own requirements to address its particular objectives By each project, ASBJ will decide upon whether to differentiate them for limited period, weighting its advantage and disadvantage 6 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

8. Interests of Japanese constituents Japanese constituents have strong interests in series of quarterly progress reports issued by the IASB and the FASB How the IASB and the FASB can reach a converged solution for each project When each project is expected to be finalized 7 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

9. In 2009, ASBJ set up the IFRS Practice Group, to identify implementation issues of IFRSs The Group consists of preparers and auditors in addition to ASBJ members and staffs The Group has been in touch with IASB members and its staffs in some critical respects Post retirement benefit trust Depreciation of tangible fixed asset Application of IFRS 1 etc. Cooperate with the IFRS Implementation Task Force, which administered jointly by the Japan Business Federation and the Japanese Institute of Certified Public Accountants 8 Activities for Application of IFRSs Copyright © 2011 Accounting Standards Board of Japan All rights reserved.

10. Council of Accounting on Unlisted Companies Established in March 2010, in response to the concern from unlisted companies Try to mitigate the concern that IFRS may be applied to unlisted companies or unlisted companies may be disadvantaged from the increasing complexity of accounting standards In August 2010, based on the deliberation, the Council set out suggestions to develop another set of accounting guidance to be applied to smaller (or micro) companies 9 Copyright © 2011 Accounting Standards Board of Japan All rights reserved.