In this section, we provide brief updates on regulatory developments in auditing and accounting that may impact Japanese companies in the United States. Further discussion of the issues can be found in KPMG's Department of Professional Practice's Defining Issues. Please contact Hideo Takada (404-222-3316；firstname.lastname@example.org) or Shin Kusanagi (404-222-7611；email@example.com) in the Atlanta office, or Terry Nagamine (213-955-8612; firstname.lastname@example.org) in the Los Angeles office, with questions.
The FASB recently issued ASUs No. 2009-16, Accounting for Transfers of Financial Assets, and No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which codify FASB Statements No. 166, Accounting for Transfers of Financial Assets, and No. 167, Amendments to FASB Interpretation No. 46(R), respectively. Statements 166 and 167 make fundamental changes to the accounting for transfers of financial assets and consolidation of variable interest entities. Both Statements may significantly affect companies’ financial statements and business arrangements and are effective for fiscal years beginning after November 15, 2009 (January 1, 2010 for companies with calendar year-ends). Early application is not permitted.
The proposed ASU, Amendments to Certain Recognition and Disclosure Requirements, which was issued on December 29, 2009 proposed the changes to FASB ASC Topic 855, Subsequent Events . Under the proposal, entities that file or furnish financial statements with the SEC no longer would be required to disclose the date through which subsequent events were evaluated in originally issued and reissued financial statements. Other entities would continue to be required to disclose the date through which subsequent events were evaluated; however, disclosures about the date through which subsequent events were evaluated in reissued financial statements would be required only in financial statements revised because of an error correction or retrospective application of U.S. GAAP.
FASB ASU No. 2010-02, Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification modifies the scope provisions in FASB ASC Subtopic 810-10, Consolidation – Overall (originally issued as FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements), so that the revised decrease in ownership requirements applies to all subsidiaries and groups of assets that are businesses or nonprofit activities, but not to in-substance sales of real estate or oil- and gas-producing activities. The ASU modifies the scope provisions of Subtopic 810-10 so that the decrease in ownership requirements also applies to transfers of subsidiaries that are businesses or nonprofit activities, to equity method investees or joint ventures, and to transfers of groups of assets that constitute businesses or nonprofit activities in exchange for a noncontrolling interest in another entity. The requirements are effective in the period in which an entity adopted Statement 160. If Statement 160 was adopted before the revised guidance was issued, the requirements are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009, and the requirements would have to be applied retrospectively to the first period in which Statement 160 was adopted.
SEC’s recently issued Compliance and Disclosure Interpretations (C&DIs) about non-GAAP financial measures that update and replace previous guidance. The SEC staff expects that the new guidance will encourage companies to disclose more non-GAAP financial measures in filings with the SEC that comply with Regulation G and Item 10(e) of Regulation S-K. In recent public speeches, the SEC staff indicated that it believes that the previous guidance in 2003 FAQs created an environment in which periodic reports and other SEC filings excluded meaningful information because filers perceived that the interpretive guidance was more restrictive than what Regulation G and S-K Item 10(e) intended. This prompted the SEC staff to issue the new C&DI guidance.
The FASB recently issued three ASUs:
- No. 2010-04, Technical Corrections to SEC Paragraphs. This ASU provides technical corrections to SEC paragraphs within various topics of the FASB Codification.
- No. 2010-05, Escrowed Share Arrangements and the Presumption of Compensation. This ASU codifies EITF Topic D-110, “Escrowed Share Arrangements and the Presumption of Compensation.”
- No. 2010-06, Improving Disclosures about Fair Value Measurements. This ASU provides new and clarified guidance about disclosure requirements of FASB ASC Subtopic 820-10, Fair Value Measurements and Disclosures. The new disclosures include transfers in and out of levels 1 and 2, and activity in level 3 fair value measurements. The ASU also clarifies existing disclosure requirements about the level of disaggregation and disclosures about inputs and valuation techniques. The amendments in the ASU are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Early adoption is permitted.
FASB ASU No. 2010-06, Improving Disclosures about Fair Value Measurements amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to require reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information about purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The ASU also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques.
Except for the detailed Level 3 roll forward disclosures, the guidance in the ASU is effective for annual and interim reporting periods beginning after December 15, 2009 (first quarter of 2010 for public companies with calendar year-ends). The new disclosures about purchases, sales, issuances, and settlements in the roll forward activity for Level 3 fair-value measurements are effective for interim and annual reporting periods beginning after December 15, 2010 (first quarter of 2011 for public companies with calendar year-ends). Early adoption is permitted.