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Derivative Counterparties
We are a direct counterparty to the foreign currency swaps that we have entered into in connection with certain of our
senior notes and subordinated debentures; foreign currency forwards; foreign currency options; and interest rate
swaptions, therefore we are exposed to credit risk in the event of nonperformance by the counterparties in those
contracts. For the foreign currency and credit default swaps associated with our VIE investments for which we are the
primary beneficiary, we bear the risk of foreign exchange and/or credit loss due to counterparty default even though we
are not a direct counterparty to those contracts. The risk of counterparty default for our VIE and senior note and
subordinated debenture swaps, foreign currency forwards and options, and swaptions is mitigated by collateral posting
requirements the counterparty must meet. If collateral posting agreements are not in place, the counterparty risk
associated with foreign currency forwards and foreign currency options is the risk that at expiry of the contract, the
counterparty is unable to deliver the agreed upon amount of yen at the agreed upon price or delivery date, thus exposing
the company to additional unhedged exposure to U.S. dollars in the Aflac Japan investment portfolio. See Note 4 of the
accompanying Notes to the Consolidated Financial Statements for more information.
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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in
Internal Control - Integrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based
on our evaluation under this framework, management has concluded that our internal control over financial reporting was
effective as of December 31, 2016.
KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of
internal control over financial reporting as of December 31, 2016, which is included herein.