FB-1048/2013 São Paulo, July 02, Ref.: IASB - Exposure Draft Financial Instruments: Expected Credit Losses - ED/2013/3

Transcription

1 Tel.: FB-1048/2013 São Paulo, July 02, International Accounting Standard Board 30 Cannon Street London, EC4M 6XH United Kingdom Ref.: IASB - Exposure Draft Financial Instruments: Expected Credit Losses - ED/2013/3 Dear Sir/Madam, The (FEBRABAN) appreciates the opportunity to comment on the International Accounting Standards Board s (IASB) Exposure Draft Financial Instruments: Expected Credit Losses (ED/2013/3). FEBRABAN is the leading body representing the Brazilian banking sector. It was founded in 1967 and our mission is to contribute to the economic, social and sustainable development of the country, seeking a continuous improvement of the financial system and its relations with society. We believe that a healthful, ethical and efficient financial system is essential condition for this development. In Brazil, discussions on accounting convergence have been increasing over the last years. The Central Bank of Brazil, federations as FEBRABAN, market representatives and accountant associations have actively taken part in the dialogues and analysis. Regarding to the ED/2013/3, we would like to comment that this letter was prepared by FEBRABAN s IFRS workgroup (GT IFRS), which is composed by accountant specialists indicated by our members and that they are responsible in their financial institution to prepare IFRS financial statements. It is important to emphasize that although the document summarizes the views of this Federation, we have also made recommendations to our members to send comments directly to IASB, if they deem necessary. FEBRABAN s intention is to give a contribution on the discussions of Financial Instruments: Expected Credit Losses Exposure Draft since it is a subject that represents a significant change in the way of recognizing allowances for credit losses and consequently will brings huge impacts to Brazilian bank institutions, which are among the main sources of credit in Brazil. The detailed comments and answers to IASB questions on the exposure draft are included in the Appendix to this letter, where is possible to find some suggestions and improvement proposals that FEBRABAN believes are important to the reception of such new impairment model by the Brazilian financial institutions. We are pleased of your consideration on the comments included in this letter and in case of any questions or concerning to them, please contact FEBRABAN GT IFRS, by the electronic address informed as follows: adriano.tomo@febraban.org.br. Yours sincerely, Wilson Roberto Levorato Executive Vice President Wilson Antonio Salmeron Gutierrez Technical Director

2 Carta FB-1048/2013, de /12 Question 1 Objective of an expected credit loss model Appendix a) Do you agree that an approach that recognises a loss allowance (or provision) at an amount equal to a portion of expected credit losses initially, and lifetime expected credit losses only after significant deterioration in credit quality, will reflect: (i) the economic link between the pricing of financial instruments and the credit quality at initial recognition; and (ii) the effects of changes in the credit quality subsequent to initial recognition? If not, why not and how do you believe the proposed model should be revised? We conceptually support the approach to recognize the allowance for credit losses proposed in the exposure draft and it is a reasonable proxy between the pricing of financial instruments and the credit quality at initial recognition. However, we are concerned about potential impacts of a substantial change in credit risk, when the entity needs to increase the loss allowance (or a provision) due to the transition from 12-month expected credit losses (Stage 1) to a lifetime expected credit losses (Stage 2), mainly in the case of financial institutions that has financial assets portfolios concentrated in certain industries or it is comprised substantially of individually material financial assets. We believe the recognition of such loss allowance (or provision) may impact significantly the results of these financial institutions in a specific year and may not strike a faithful balance between the recognition of loss allowance and different pricing models applied by certain financial institutions i.e. investment banks. As a result, we would suggest the option as an account policy election of the simplified approach to financial assets portfolios or by financial institutions where its portfolios are comprised substantially of material financial assets that are evaluated on an individual basis. We have also considered that such option would permit certain financial institutions, investment banks mainly, to avoid additional costs if they could have the possibility to choose between applying either an impairment model based on loss allowance recognized in stages (12-month and lifetime) or the simplified approach (lifetime expected loss since the inception date). b) Do you agree that recognising a loss allowance or provision from initial recognition at an amount equal to lifetime expected credit losses, discounted using the original effective interest rate, does not faithfully represent the underlying economics of financial instruments? If not, why not? Yes, we do, especially for retail portfolios. In this kind of segment, considering the large volume of transactions and he diversity of debtors, the entity does not have flexibility to monitor the interest rate according to client credit quality individually, and a way to compensate this difficulty would be constitute first a provision at the inception date considering a portion of the lifetime expected credit losses (12 month approach) and utilize other evidences of credit deterioration, for instance delay on payments, to increment the allowance amount (lifetime expected credit losses full application). Therefore, we believe that recognising a loss allowance or provision from initial recognition at an amount equal to lifetime expected credit losses, discounted using the original effective interest rate, without taking in consideration counterpart credit behavior, do not faithfully represent the underlying economics of the transaction, since the pricing of financial instrument is based on the credit risk at the moment of the transaction is originated.

3 Carta FB-1048/2013, de /12 We would like to emphasize the fact that our understanding should not be seen as conflicting with the comment made in question 1(a) above, where we have suggested that the entity may have the option to adopt the Simplified Approach for financial instruments individually significant, supported in the greater objective of IFRS that is to produce a set of standards based on principles able to provide financial statements that represent transactions economic substance as well as the portfolios credit managerial model adopted by the entities. Question 2 The Main Proposals in This ED a) Do you agree that recognising a loss allowance (or provision) at an amount equal to 12-month expected credit losses and at an amount equal to lifetime expected credit losses after significant deterioration in credit quality achieves an appropriate balance between the faithful representation of the underlying economics and the costs of implementation? If not, why not? What alternative would you prefer and why? We agree, especially in case of retail portfolios. The proposed model offers a good relationship between the faithful representation of economic aspects related to the transaction and costs of implementation, since the recognition of lifetime expected credit losses at the inception date could lead the financial asset to a strong penalty and additionally not observe the accrual basis accounting principle. On the other hand, the recognition of lifetime expected credit losses only after identifying evidences of credit quality deterioration provides more aligned information about the economic status of the financial instrument. Furthermore, we consider that the methodology in reference is closed to the one required by Basel models, which could lead the entity to an implementation cost reduction at the initial application as well as after its adoption, when the pronouncement must be observed on a recurrent way. b) Do you agree that the approach for accounting for expected credit losses proposed in this Exposure Draft achieves a better balance between the faithful representation of the underlying economics and the cost of implementation than the approaches in the 2009 ED and the SD (without the foreseeable future floor)? Yes, we believe that the model proposed in the current ED offers a better balance between the faithful representation of the economic event and the costs of its operation/implementation than the one which has been presented in previous years. In fact the previous model proposed in the 2009 ED actually provided an adequate credit risk monitoring process and consequently a timely expected losses recognition, but the constant updating of effective interest rates, considering the future flows contracted and expected future cash flows, made the method difficult to be applied and still quite costly. c) Do you think that recognising a loss allowance at an amount equal to the lifetime expected credit losses from initial recognition, discounted using the original effective interest rate, achieves a better balance between the faithful representation of the underlying economics and the cost of implementation than this Exposure Draft? In general we consider that this ED model, that establishes assets allocation into stages (three buckets) according to credit performances and applying different levels of losses allowances (12-month expected loss

4 Carta FB-1048/2013, de /12 and lifetime expected loss), produces a good visualization of the credit portfolios condition, thus better representing the underlying economics. About implementation costs comparison between the two proposed models, we did not identify any material differences that could lead the entity to decide by the adoption of the lifetime expected credit losses from initial recognition only, based on the fact that this approach achieves a better balance between faithful representation and the underlying economics. Perhaps this methodology (lifetime expected loss from initial) could be less costly in the case of financial instruments individually significant, as it was already suggested on question 1(a). Question 3 - Scope a) Do you agree with the proposed scope of this Exposure Draft? If not, why not? Yes, we agree in general, except the ones commented on this paper (for example the application of the model to loan Commitments, as stated in question 9). (b) Do you agree that, for financial assets that are mandatorily measured at FVOCI in accordance with the Classification and Measurement ED, the accounting for expected credit losses should be as proposed in this Exposure Draft? Why or why not? Yes, we agree with the application of the model proposed in this ED for financial instruments classified as FVOCI since these instruments have similar credit risk exposure as other assets measured at amortized cost. In addition, these assets are those that have contractual cash flows that are solely payments of principal and interest. Question 4 12-month expected credit losses Is measuring the loss allowance (or a provision) at an amount equal to 12-month expected credit losses operational? If not, why not and how do you believe the portion recognised from initial recognition should be determined? Yes, we believe it's possible to apply the 12-month expected credit losses model proposed. We hope this approach could reduces the cost of implementation, due to its concepts are closed to that the entities have been applying in order to attend Basel requirements. Question 5 Assessing when an entity shall recognise lifetime expected credit losses (a) Do you agree with the proposed requirement to recognise a loss allowance (or a provision) at an amount equal to lifetime expected credit losses on the basis of a significant increase in credit risk since initial recognition? If not, why not and what alternative would you prefer? Yes we do, because the proposed requirement will enable the segregation of contracts between performing assets and under-performing assets.

5 Carta FB-1048/2013, de /12 According described in question 1a, we reiterate our suggestion to include the option to adopt the Simplified Approach for individually significant financial instruments. (b) Do the proposals provide sufficient guidance on when to recognise lifetime expected credit losses? If not, what additional guidance would you suggest? Yes, in general we believe the proposals provide sufficient guidance to determine when to recognize lifetime expected credit losses. However, we think that instructions on item B17 should be revisited, since we do not agree that assets assessed on a collective basis for a 12-month expected credit losses allowance should be assessed individually when the entity considers that lifetime expected credit losses recognition is required. We propose that in case of movement from Stage 1 (12-month) to Stage 2 (lifetime) the assets shall continue to be assessed on a collective basis, allowing the entity to keep credit model consistence and avoid incremental operational costs. (c) Do you agree that the assessment of when to recognise lifetime expected credit losses should consider only changes in the probability of a default occurring, rather than changes in expected credit losses (or credit loss given default ( LGD ))? If not, why not and what would you prefer? Yes we agree. In our view only PD should be used by the entity in assessment when it needs to recognize lifetime expected losses. (d) Do you agree with the proposed operational simplifications, and do they contribute to an appropriate balance between faithful representation and the cost of implementation? Yes, we agree with the proposed operational simplifications, and we think that they contribute to an appropriate balance between faithful representation and the cost of implementation. (e) Do you agree with the proposal that the model shall allow the re-establishment of a loss allowance (or a provision) at an amount equal to 12-month expected credit losses if the criteria for the recognition of lifetime expected credit losses are no longer met? If not, why not, and what would you prefer? Yes, we fully agree with the proposal in reference. Question 6 Interest Revenue a) Do you agree that there are circumstances when interest revenue calculated on a net carrying amount (amortised cost) rather than on a gross carrying amount can provide more useful information? If not, why not, and what would you prefer? It is possible that interest revenue recognition by net carrying amount could provide useful information; however after analyzing Stage 3 characteristics, we are not sure that such proposal represents the better accounting criterion.

6 Carta FB-1048/2013, de /12 Considering that on Stage 3 the entity classifies non-performing assets, we understand that the best accounting practice should be the application of non-accruing concept, as recommended by the Board in IAS 18 item 29(a). interest revenue shall be recognized when it is probable that the economic benefits associated with the transaction will flow to the entity. In addition, we have some concerns on how to adopt/apply the proposal, since the implementation of such procedure is expensive and represents a big maintenance on banks credit legacy systems. It is important to take in consideration that retail segment represents a large percentage of asset s portfolios on Brazilian banks balance sheet and to develop an automatic routine that identifies (individually) the financial instrument and its related allowance, in order to obtain the net carrying amount is extremely onerous in financial and operational terms. Again, to spend money on Stage 3 financial assets is questionable, since it is composed by financial instruments where the entity does not expect to collect interests and is even possible to lose part of the notional amount. Therefore, the policy of stopping interest accrual routine should be applied. b) Do you agree with the proposal to change how interest revenue is calculated for assets that have objective evidence of impairment subsequent to initial recognition? Why or why not? If not, for what population of assets should the interest revenue calculation change? Yes we do, but in our opinion the comments made on (a) above must be discussed before the approval of such Exposure Draft by the Board. c) Do you agree with the proposal that the interest revenue approach shall be symmetrical (ie that the calculation can revert back to a calculation on the gross carrying amount)? Why or why not? If not, what approach would you prefer? Yes we do, since the cure is a normal and common situation on assets portfolios, consequently revenue recognition must reflect such improvement on credit quality. Question 7 - Disclosure a) Do you agree with the proposed disclosure requirements? Why or why not? If not, what changes do you recommend and why? We agree partially. Actually it is important to evaluate that retail market in Brazil is huge and in order to be complying with the requirements the entities will incur in incremental costs. Therefore, we suggest maintaining the requirements set out in paragraphs 18 and 19 of IFRS 7 and eliminate the paragraphs 38 (a) and (b) of the Exposure Draft 2013/3, because these disclosures will require many investments and probably they will not revert into a significant qualitative information to the investors. For instance, modifications are common in Brazilian financial market, and to provide the details required on item 38 (a) and (b) is not simple, especially when the client has contracted many transactions with the entity and they are synthesized on a unique deal with different interest rate. The example below helps to understand our concerns:

7 Carta FB-1048/2013, de /12 Deal Past Due Original interest rate Current Total Amount Discount on Renegotiation New Total Amount Car Loan 90 days 2,00 % a.m. BRL BRL BRL Personal Loan 70 days 2,50% a.m. BRL BRL BRL Credit Card 120 days 3,20% a.m. BRL BRL BRL TOTAL 3,00% a.m. BRL BRL BRL (new EIR) Observation: In this hypothetical example, three different kinds of financial assets were converted into an unique deal (BRL = * 3,00% a.m.). Such situation is very common in Brazilian environment, which means that a lot of efforts will be required from the financial institutions in order to be complying with this Disclosure proposal. b) Do you foresee any specific operational challenges when implementing the proposed disclosure requirements? If so, please explain. See the example provided on (a) above. c) What other disclosures do you believe would provide useful information (whether in addition to, or instead of, the proposed disclosures) and why? We do not have any additional suggestions regarding other disclosures that could provide useful information on the ED. Question 8 Application of the model to assets that have been modified but not derecognised Do you agree with the proposed treatment of financial assets on which contractual cash flows are modified, and do you believe that it provides useful information? If not, why not and what alternative would you prefer? We have the concern of recognizing gain or loss in P&L when the contract is not derecognized and credit quality remains unchanged. The issue here is that we do not notice any reason that justifies the recognition of a gain when the entity enter into a renegotiation that modifies contract s cash flow and such renegotiation results in some benefit. Our opinion is based on the assumption that if the contract was renegotiated it means that either it has not been performing as expected due to credit quality deterioration or the counterparty is looking for a interest rate revision (reduction). Consequently a modification gain is very rare in our credit market, but in case of it occurs, our view is that the gain should be recognized in P&L only when it flows to the entity (cash is collected). Regarding renegotiation loss, such as a discount, we understand that P&L recognition makes sense on the accounting view. Question 9 Application of the model to loan commitments and financial guarantee contracts a) Do you agree with the proposals on the application of the general model to loan commitment and financial guarantee contracts? Why or why not? If not, what approach would you prefer?

8 Carta FB-1048/2013, de /12 We do not agree with the application of the general model to loan commitments nor to financial guaranties. We believe that provision for loan commitment and financial guarantee are not in accordance with the scope of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets in the following terms: 1) For a liability to qualify for recognition there must be not only a present obligation but also the probability of an outflow of resources embodying economic benefits to settle that obligation. For the purpose of this Standard, an outflow of resources or other event is regarded as probable if the event is more likely than not to occur, ie the probability that the event will occur is greater than the probability that it will not. Where it is not probable that a present obligation exists, an entity discloses a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote (see paragraph 86). (IAS 37, 23) Reading the quoted item, we understand that for a liability to qualify for recognition there should not only be a present obligation but also the probability that resources embodying economic benefits will outflow from the entity to settle an obligation Considering the context under discussion, we infer that for an entity to recognize a provision it should assess the probability that future expected cash flows will not flow to the entity. Therefore, we think that, in the case of loan commitments, we cannot consider such probability because there is no asset recognized that would give an entity the right to receive future expected cash flows. Considering financial guarantee contracts we also think that there is no provision for an entity to recognize, since the probability that the outflow will not occur is greater than the probability that it will. Financial statements deal with the financial position of an entity at the end outfits reporting period and not its possible position in the future. (IAS 37, 18). We consider that when recording a provision for a loan commitment or a financial guarantee contract an entity is not complying with the quoted item, once the costs and benefits of such instrument are related to a future position that we are not able to foresee. It is important to address that there are many Brazilian retail products that extend credit to clients, which can be used according to customer convenience/needs. The most common are cheque especial (financial on bank accounting overdraft); credit card, pre-approved personal loans, etc. Such products do not bring any gain to the entity until clients start to use them. Consequently, in our opinion if the entity recognizes a provision against P&L, but there is not any revenue (fee) associated, the Exposure Draft enters into a conflict with the Conceptual Framework 4.50 (Chapter 4): Recognition of Expenses: Expenses are recognized in the income statement on the basis of a direct association between the costs incurred and the earning of specific items of income. This process, commonly referred to as the matching of costs with revenues, involves the simultaneous or combined recognition of revenue and expenses that result directly and jointly from the same transaction or other events. Therefore, we think that loan commitment and financial guarantee contracts actually match the concept of contingent liabilities, as defined in IAS 37 (10): A contingent liability is: (a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (b) a present obligation that arises from past events but is not recognized because:

9 Carta FB-1048/2013, de /12 (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability. Concluding, we consider that loan commitments should be treated under the scope of IAS 37- Provisions, Contingent Liabilities and Contingent Assets, meeting the disclosure criteria of such standard. b) Do you foresee any significant operational challenges that may arise from the proposal to present expected credit losses on financial guarantee contracts or loan commitments as a provision in the statement of financial position? If yes, please explain. We foresee significant operational challenges for application of the general model for loan commitment, as the general model should capture and execute the following actions: Segregate the customers who will use the loan commitment entirely or a part of it, from those who will never use it; Considering the customers who usually get the loan commitment, the entity will estimate the amount that will become a loan. Estimate the expected loss, considering the amount that will probably be used; and Assess whether the expected loss is recognized considering the 12-month expected credit losses or the lifetime expected credit losses. We believe that a model that has to deal with so many variables would be inefficient and costly. Question 10 Simplified Approach for trade receivables and lease receivables a) Do you agree with the proposed simplified approach for trade receivables and lease receivables? Why or why not? If not, what changes do you recommend and why? Yes we do, especially when the new accounting orientation is applied by entities that are not financial institutions. b) Do you agree with the proposed amendments to the measurement on initial recognition of trade receivables with no significant financing component? If not, why not and what would you propose instead? Yes we do. The comment made on BC143 of the ED gives the clear idea of trade receivables characteristics, it means, they do not have a significant financial component and the majority of them presents a duration less than one year. Therefore in such condition the 12-month expected credit losses and lifetime expected credit losses will be practically the same and the simplified approach is the most appropriate credit impairment model for this kind of financial portfolio. Question 11 Financial assets that are credit-impaired on initial recognition Do you agree with the proposals for financial assets that are credit-impaired on initial recognition? Why or why not? If not, what approach would you prefer? We agree with the proposal; however we suggest further permission to give the following treatment:

10 Carta FB-1048/2013, de /12 On initial recognition, the incurred losses in the acquisition or in the origination of credit-impaired assets would be considered in the calculation of the effective interest rate, as recommended by the item AG5 of IAS 39. In subsequent recognition, the expected credit losses would be recognized as lifetime expected credit losses. In our opinion, the impaired asset should be classified on Stage 3, and the revenue recognition on the cash basis of accounting. We believe that our proposal significantly reduces operational costs and permits the representation of the economic substance of the underlying transaction. Additionally, we think that the Board propose requires an entity to maintain two systems for loss allowance recognition, one for the general model and another for the credit-impairment model, generating additional costs, while our proposal could be handled by the general model, reducing costs. Question 12 Effective date and transition a) What lead time would you require to implement the proposed requirements? Please explain the assumptions that you have used in making this assessment. As a consequence, what do you believe is an appropriate mandatory effective date for IFRS 9? Please explain. Considering that financial institutions in Brazil are not yet applying IFRS full, in order to be complying with this new proposal, Brazilian banks will need at least 2 years after IASB approval to adequate their financial statements. The main assumption for this assessment we have already mentioned (Brazilian banks follow a specific impairment accounting model defined by Brazilian Central Bank). It means that legacy system must be customized in order to become multigaap and mainly to develop new functions that are able to provide necessary information to produce an acceptable disclosure report. Based on the above comments we have the following suggestion: (i) IFRS 9 application: 2017 (ii) IAS 8 should be adopted prospectively (see comments on question (b) below); b) Do you agree with the proposed transition requirements? Why or why not? If not, what changes do you recommend and why? In our opinion this transition between accounting criteria is complex and represents a big challenger for financial statements producers. In this way we support all IASB decisions that can (i) simplify the Expected Credit Losses Model implementation process and (ii) reduces P&L impact at the moment of new requirements first application. See below some complementary comments related to this question that we would like to add and that we expect could contribute to the final text of the pronouncement transition requirements. According to IAS 8 (item 5 Definitions): a change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and

11 Carta FB-1048/2013, de /12 liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. In this case, after analyzing the requirements of the new text for recognizing financial instruments expected credit losses on amortized cost portfolios, we have concluded that the proposals of the exposure drat fits better the definition of change in accounting estimate instead of change on accounting policies. Being more precise, the accounting entries process will not suffer significant modifications in comparison with the current ones recommended by IAS 39 (accounting procedure to book allowances and provision amounts). Actually, in our point of view, IASB expects to develop an approach/model that is capable to capture the efforts of internal risk models of tracking loss given default and captures probable future assets cash shortage, transforming such figures into an adequately accounting information with the purpose of improving entity s balance sheet quality. Summarizing it is a clear process of change in accounting estimative. Therefore the application of IAS 8 should be done prospectively as determined in item 36 (b): The effect of a change in accounting estimate, other than a change to which paragraph 37 applies, shall be recognized prospectively by including it in profit or loss in: (a). (b) the period of the change and future periods, if the change affects both. Assuming that the new impairment rules based on expected credit loss could be adopted prospectively, due to the huge volume of Brazilian financial institutions credit portfolios, we would like to emphasis that the transition requirements define on Appendix C of the ED is very important to bank industry in Brasil. So we strongly support the board definition that establishes that the effects of the initial expected credit losses adjustment could be done against Equity (Retained Earnings or other component of Equity Item C2). We understand that such accounting procedure makes sense since if the prospective application is done against P&L it will produce a severe and negative impact on entity expenses amount, which will be difficult to be supported by the current operational revenues at the year of first application. Moreover, analyzing the adjustment in the light of economic substance, we think that it is not fair to sacrifice the entity current period result when the reason of the negative impact is a consequence of an accounting estimate that has been applied on previous periods and now it is necessary to be replaced once incurred losses no more satisfies the financial statements users needs. At least we are favorable with the request made on C4, where, at the date of initial application, the entity should prepare a conciliation that permits the users to assess the impairment amount calculated according to the old IAS 39 (incurred loss approach) and the value of new allowances/provisions resulted from the adoption of a model based on an expected credit loss perspective. c) Do you agree with the proposed relief from restating comparative information on transition? If not, why? Yes we do. It is a very good exception, which could be better defended/justified if the Board agrees that new requirements must be seem as a change in accounting estimate and its adoption shall be done prospectively as commented on previous question (12b). Certainly to define whether it is a change in accounting policy or a change in accounting estimate is a difficult task and deserves judgment. IASB recognizes it and have defined that when the entity has doubts about which criterion it should apply the change must be treated as a change in accounting estimate (IAS 8 Item 34 see below). When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.

12 Carta FB-1048/2013, de /12 Question 13 Effects analysis Do you agree with the IASB s assessment of the effects of the proposals? Why or why not? Yes, in a macro view. In order to become such Exposure Draft a feasible Pronouncement, in our opinion it is important to consider the answers and issues provided in this paper.