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.
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The annual Financial Executives International financial reporting issues conference held on November 12-13, 2012 primarily focused on FASB and IASB joint projects, developments at the SEC and PCAOB, and other accounting and financial reporting topics. Panelists at the conference represented those organizations, industry, and accounting firms, and responded to questions from an audience that included financial statement preparers, users, and auditors.
In November 2012, the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the SEC issued A Resource Guide to the U.S. Foreign Corrupt Practices Act.
The 120-page Guide contains detailed information about the DOJ and SEC's position on key provisions of the Foreign Corrupt Practices Act (FCPA), including:
- Who and what is covered by the FCPA's anti-bribery and accounting provisions;
- The definition of a foreign official;
- What constitutes proper and improper gifts, travel, and entertainment expenses;
- The nature of facilitating payments;
- How successor liability applies in the context of mergers and acquisitions;
- The features of an effective corporate compliance program; and
- Potential consequences for violating the FCPA and civil and criminal resolutions available.
The Guide is written in a plain English format and includes examples with hypothetical fact patterns that illustrate FCPA provisions and definitions. The Guide also includes practical suggestions for reducing FCPA risk.
Topics covered in the Guide that are particularly relevant to accountants and auditors include the accounting provisions of the FCPA, applicable sections of the Sarbanes-Oxley Act of 2002, and auditor obligations under Section 10A of the Exchange Act of 1934.
On November 28, 2012, the IASB recently issued an Exposure Draft that proposes limited amendments to IFRS 9, Financial Instruments, related to the classification and measurement of financial assets and liabilities. The IASB decided to amend the standard to address a narrow range of application questions, reduce key differences between the IASB and FASB classification and measurement models, and take into account the interaction with the accounting for insurance contract liabilities. This edition of Defining Issues highlights the significant changes proposed in the IASB's Exposure Draft and compares the IASB's proposed and FASB's tentative classification and measurement models.
On December 6, 2012, the Private Company Council (PCC) held its first public meeting and asked the FASB staff to research four areas for consideration as potential initial agenda projects. The PCC and the FASB also discussed comments received on the Discussion Paper that describes the FASB staff's recommendations for criteria to be used by the PCC and the FASB in determining whether to make exceptions to or to modify U.S. GAAP for private companies that prepare U.S. GAAP financial statements.
At the annual AICPA National Conference on Current SEC and PCAOB Developments on December 3-5, 2012, representatives of the SEC, PCAOB, FASB, IASB, CAQ, and AICPA discussed the critical role that accountants play in capital formation by providing investors with relevant and reliable information that is necessary for market efficiency. They discussed the most critical accounting and reporting issues affecting SEC registrants and auditors, including:
- Using IFRS in the United States;
- Observations and recommendations for preparers related to providing transparent disclosures;
- The SEC's filing review process;
- Reporting observations identified during reviews of registrants' filings;
- Internal control over financial reporting;
- Audit quality and the role of the audit committee; and
- Priorities of accounting and auditing standard setters.
In the FASB and IASB Joint Meeting held on December 17, 2012, the FASB and IASB made tentative decisions about their revenue recognition project related to costs of obtaining a contract, allocating the transaction price, constraining the amount of revenue recognized on licenses of intellectual property, and applying the proposal to certain bundled arrangements.
On December 20, 2012, the FASB issued a proposed ASU that would change the way entities recognize credit impairment on financial assets that are not measured at fair value with changes in fair value recognized in net income. The FASB's proposed impairment model is intended to result in more timely recognition of credit losses and provide additional transparency about credit risk. It is based on a single measurement objective that would reflect an entity's current estimate of contractual cash flows that are not expected to be collected. This edition of Defining Issues describes the FASB's proposed impairment model and compares the significant provisions of the FASB's proposed and IASB's tentative impairment models.
On January 7, 2013, the FASB issued a proposed ASU that would clarify the scope and applicability of a fair value disclosure exemption that is specific to private companies and nonpublic not-for-profit organizations. The proposed ASU addresses some constituents' concern that, contrary to the intent of ASU 2011-04, certain nonpublic entities would not qualify for the exemption. The proposed ASU would apply to December 31, 2012 financial statements.
At the January 17, 2013 meeting of the FASB's Emerging Issues Task Force (EITF), the Task Force reached final Consensuses about two issues (1) accounting for the cumulative translation adjustment upon certain derecognition events and (2) accounting for joint and several liability arrangements. The EITF also reached a Consensus-for-Exposure about two other issues (1) adding the fed funds rate to the benchmark interest rates used for hedge accounting purposes and (2) the effect of net operating losses on the presentation of a liability for unrecognized tax benefits. Finally, the EITF discussed accounting for certain personnel services received by a not-for-profit entity from an affiliate, potential guidance about the scope and application of pushdown accounting, and the accounting for public-to-private service concession arrangements. The FASB must ratify the final Consensuses and the Consensuses-for-Exposure before they become authoritative or are issued for exposure, respectively.
On January 15, 2013, the FASB issued a proposed ASU, Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings, which would change the accounting for repurchase-to-maturity agreements. Under current guidance, those agreements may meet the criteria to be accounted for as sales; however, the proposed ASU would require them to be accounted for as secured borrowings.
At their January 30 meeting, the FASB and IASB reached tentative decisions about how an entity (i.e., lessee or lessor) should identify and account for separate lease components in a contract that contains multiple underlying assets. The Boards plan to issue revised Exposure Drafts near the end of the first quarter of 2013, and to begin redeliberations of those revised EDs in the second half of 2013.