Auditing & Accounting Update 

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 Michael Maekawa (213-955-8331; in the Los Angeles office or Shin Kusanagi (404-222-7611; in the Atlanta office, with questions.


FASB and IASB Issue Revised Exposure Drafts on Lease Accounting

On May 16, 2013, the FASB and IASB issued revised joint Exposure Drafts about proposed changes to the accounting for leases that, if finalized as proposed, would significantly change how lessees and lessors account for and report leasing arrangements in their financial statements. The Boards made extensive modifications to their 2010 lease accounting proposals in response to the nearly 800 comment letters and other input received from constituents. Some notable changes from the 2010 proposals include a dual-model approach for lessee accounting that would change the pattern and presentation of lease expense for some leases, significant revisions to the lessor accounting model, new lease classification tests that would apply to lessees and lessors, a new way of estimating the lease term, and changes to the accounting for most variable lease payments.



COSO Releases Internal Control – Integrated Framework (2013)

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its Internal Control – Integrated Framework (2013). The Defining Issues summarizes the changes in the 2013 Framework from the 1992 Framework and KPMG's initial thoughts about the implications of the Framework for management's assessment of internal control over financial reporting as organizations transition to the 2013 Framework.



SEC Issues Guidance for Conflict Minerals and Disclosure of Payments by Resource Extraction Issuers

On May 30, 2013, the SEC staff issued frequently asked questions and responses about complying with its rules on conflict minerals and disclosure of payments by resource extraction issuers. Both rules were adopted by the SEC in 2012 to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act.



AICPA Issues Practice Aid for Valuation of Privately-Held-Company Equity Securities Issued as Compensation

On May 1, 2013, the AICPA issued a Practice Aid that addresses the valuation of privately-held-company equity securities that are issued as compensation. The Practice Aid includes a discussion about applying FASB ASC Topic 820, Fair Value Measurement, to measuring privately-held-company equity securities that are issued as compensation; considerations for determining the appropriate basis of valuation (e.g., a minority interest subject to current ownership versus the sale of a controlling interest in an entity); and leading practices for estimating the fair value of privately-held-company equity securities based on the company's stage of development.



EITF Reaches Two Final Consensuses

In its June 11 meeting, the FASB's Emerging Issues Task Force (EITF) discussed six issues and reached final Consensuses on two issues: inclusion of the fed funds effective swap rate (or overnight index swap rate) as a benchmark interest rate for hedge accounting purposes; and presentation of an unrecognized tax benefit when a net operating loss carryforward or tax credit carryforward exists.

Additionally, the EITF reached three Consensuses-for-Exposure: accounting for the difference between the fair value of the assets and the fair value of the liabilities of a consolidated collateralized financing entity (re-exposure); accounting for service concession arrangements; and reclassification of collateralized mortgage loans upon a troubled debt restructuring.



AICPA Releases Financial Reporting Framework for Small- and Medium-Sized Entities

On June 10, 2013, the AICPA released its Financial Reporting Framework for small- and medium-sized entities (FRF for SMEs). Unlike the FASB and its Private Company Council's private company initiative to consider whether modifications or exceptions to U.S. GAAP should be available for private companies that issue GAAP financial statements, the FRF for SMEs is a self-contained, other comprehensive basis of accounting that would not affect GAAP.


The FRF for SMEs is available for use by private entities whose financial statement users will accept financial statements prepared under the FRF for SMEs.



FASB Proposes Standard for Going Concern Disclosures

On June 26, 2013, the FASB issued a proposed ASU that would provide guidance about when and how entities should disclose going concern uncertainties in financial statements. All entities would be required to assess at each reporting period their ability to meet their obligations as they become due within 24 months of the financial statement date to determine whether it is necessary to include financial statement disclosures about going concern uncertainties. An SEC filer also would be required to evaluate whether there is substantial doubt about its ability to continue as a going concern and, if so, it would need to express that conclusion in the financial statements.



PCC Proposes Alternative Accounting Methods for Intangible Assets and Interest Rate Swaps for Private Companies

On July 1, 2013, the FASB and Private Company Council (PCC) approved for public comment three proposals that would establish accounting alternatives for private companies that issue U.S. GAAP financial statements. If finalized, the proposals would permit private companies to select any or all of the alternatives in accounting for (1) certain identifiable intangible assets acquired in a business combination; (2) goodwill; and (3) receive-variable, pay-fixed interest rate swaps.


As proposed, these alternatives would not be available to public companies. However, the FASB may consider during the redeliberation process whether the alternatives would be appropriate for public companies.



Go to FASB Exposure Draft about Private Company Accounting for:



FASB's Proposed Changes for Insurance Contracts

On June 27, 2013, the FASB issued a proposed ASU that would change the accounting and financial reporting for insurance and reinsurance contracts issued and reinsurance contracts held regardless of the type of entity issuing or holding these contracts. This would be a change from U.S. GAAP for insurance contracts, which generally applies to only insurance companies and not to non-insurance entities that issue similar contracts (e.g., some financial guarantee contracts). Other than reinsurance contracts, the proposed ASU does not address accounting by policyholders.



Revenue Recognition: Boards Agree to Clarify Guidance on Collectibility and Variable Consideration

At their July 2013 joint meeting, the FASB and IASB reached tentative decisions to clarify the guidance in their forthcoming revenue standard about the effects of customers' credit risk (i.e., doubts about collectibility), constraining estimates of variable consideration, and accounting for consideration received in a transaction when an enforceable contract with a customer does not exist.