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.
FASB Issues Simplifications for Employee Benefit Plans
In July 2015, the FASB issued ASU No. 2015-12, (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (consensuses of the FASB Emerging Issues Task Force), which reduces complexity in employee benefit plan financial reporting and disclosure requirements. Specifically, the standard eliminates the requirement for plans to measure fully benefit-responsive investment contracts (FBRICs) at fair value and simplifies disclosure and presentation requirements about plan investments. Additionally, plans with a fiscal year-end that does not coincide with a calendar month-end may elect to adopt a practical expedient to measure investments and investment-related activity as of the month-end date that is closest to their fiscal year-end. The financial statements of plan sponsors are outside the scope of the new standard.
The ASU is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for financial statements not made available for issuance. Plans that have not yet issued their 2014 financial statements may implement these changes. The new guidance about FBRICs and plan investment disclosures requires retrospective application. The new guidance for the measurement date practical expedient requires prospective application.
Go to Defining Issues 15-36 (PDF) >
EU Audit Reforms May Affect U.S. Companies
New European Union (EU) audit reforms will take effect by mid-2016 and may affect U.S. companies, especially those with an EU parent or those with banking, insurance, or certain other subsidiaries domiciled in the EU. Although the full effect of the reforms will not be known until June 2016 when all 28 EU countries should have completed incorporating the reforms into their respective national laws, this Defining Issues outlines some of the potential effects on U.S. companies.
Go to Defining Issues 15-37 (PDF) >
FASB to Clarify Revenue Standard's Collectibility and Completed Contracts Guidance
At its August 31 meeting, the FASB decided to clarify the guidance about collectibility and what constitutes a completed contract at transition to help entities implement the new revenue recognition standard. The proposed amendments will be included in an Exposure Draft with other improvements and clarifications to the revenue standard.
Go to Defining Issues 15-38 (PDF) >
SEC Requires Pay Ratio Disclosure
On August 5, 2015, the SEC issued the final rule that requires registrants to disclose (1) the median annual total compensation of all employees excluding the principal executive officer (PEO), (2) the annual total compensation of the PEO, and (3) the ratio of the median annual total compensation of all employees to the PEO's annual total compensation.
Pay ratio disclosure is required for fiscal years beginning on or after January 1, 2017 for registration, proxy, and information statements, and annual reports that require Item 402 of Regulation S-K executive compensation disclosure. The rule does not apply to smaller reporting companies, emerging growth companies, foreign private issuers, MJDS filers, or registered investment companies.
Go to Defining Issues 15-39 (PDF) >
FASB Proposes Amendments to Principal-Agent Guidance in Revenue Standard
On August 31, the FASB issued proposed ASU, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which would amend FASB ASC Topic 606, Revenue from Contracts with Customers, to clarify how to apply principal versus agent guidance for determining whether revenue should be presented gross (as a principal) or net (as an agent).
The proposed ASU would clarify that an entity determines the nature of its promise for each specified good or service that it provides to its customer, and whether it controls each specified good or service before it is transferred to the customer. The proposed ASU also would provide indicators of when an entity controls a specified good or service, and include revised and new examples focused on linking the principal-agent conclusion to the notion of control and illustrating how an entity should use the indicators to support its evaluation of control.
The amendments in the proposed ASU would affect ASC Topic 606, which is not yet effective. The effective date and transition requirements for the amendments in this proposed ASU would be the same as the effective date and transition requirements in ASC Topic 606.
Go to Defining Issues 15-40 (PDF) >
EITF Continues Discussions on Prepaid Stored-Value Cards and Cash Flow Statement Issues
At its September 17, 2015 meeting, the FASB's EITF discussed two issues. While it reached agreement on various issues related to recognizing breakage for certain prepaid stored-value cards, it did not make a final decision about scope. It also continued discussions about certain cash-flow statement issues.
Go to Defining Issues 15-41 (PDF) >
FASB Proposes Changes to Materiality for More Effective Disclosures
On September 24, 2015, the FASB issued two Exposure Drafts (Proposed FASB ASU, Assessing Whether Disclosures Are Material and Proposed FASB Concepts Statement, Qualitative Characteristics of Useful Financial Information) as part of its Disclosure Framework project that would provide more flexibility and discretion for entities to provide material information in the notes to the financial statements.
Go to Defining Issues 15-42 (PDF) >
FASB Simplifies Measurement-Period Adjustments in Business Combinations
On September 25, 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, to eliminate the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. The ASU is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. For all other entities, the ASU is effective for annual periods beginning after December 15, 2016 and for interim periods beginning after December 15, 2017. Early adoption is permitted.
Go to Defining Issues 15-43 (PDF) >
FASB Proposes Further Amendments to Revenue Standard
On September 30, 2015, the FASB issued proposed ASU, Narrow-Scope Improvements and Practical Expedients, which is intended to clarify the application of the new revenue standard to collectibility, the date on which to measure noncash consideration, presentation of sales taxes, and transition.
Go to Defining Issues 15-44 (PDF) >
FASB and PCC Propose to Eliminate Effective Dates for Private Company Alternatives
On September 30, 2015, the FASB issued proposed ASU, Effective Date and Transition Guidance (a proposal of the Private Company Council), which would grant a private company an unconditional one-time election to adopt any of the four private company accounting alternatives developed by the PCC. The transition provisions of the proposal would allow a private company to forgo a preferability assessment the first time it elects the accounting alternatives within the scope of the proposed ASU. The proposed ASU would be effective immediately on issuance.
Go to Defining Issues 15-45 (PDF) >
FASB Redeliberates Revenue Guidance on Licensing and Performance Obligations
At its October 5 meeting, the FASB redeliberated and, in general, tentatively decided to adopt its proposed revenue guidance about accounting for licenses of intellectual property and identifying performance obligations. The redeliberations were held in response to comment letters about the FASB's proposed ASU and its staff's outreach efforts.
Go to Defining Issues 15-46 (PDF) >
FASB Completes Technical Redeliberations on Leases
At its October 7 meeting, the FASB discussed comments received and follow-up issues related to the external review of its proposed leases standard, and completed its technical decisions for the project. The Board will meet in early November to discuss effective date and cost-benefit considerations. The Board plans to issue an ASU on the new lease accounting requirements by the end of 2015.
Go to Defining Issues 15-47 (PDF) >
SEC Requests Comments on Financial Disclosures
On September 25, 2015, the SEC asked for comments about the effectiveness of required financial disclosures that companies make about acquired businesses, subsidiaries not consolidated and 50 percent or less owned persons, guarantors and issuers of guaranteed securities, and affiliates whose securities collateralize registered securities. This request is part of the Division of Corporation Finance's review of public company disclosure requirements and its initiative to identify ways to streamline and simplify disclosure requirements.
Go to Defining Issues 15-48 (PDF) >
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