[Nami]

Hi All,

I’m wondering if there are any guidelines for the accounting basis difference (i.e. depreciation method)
Ex. the parent company(Investor) is U.S.company (U.S.GAAP)and Investee company use Local GAAP.
Are there any requirement for an investors to adjust numbers on investee company from Local GAAP to U.S.GAAP ?

Thank you.

Illinois CPA 02/15

[Anonymous]

Yes, if another method besides GAAP or IFRS is used to prepare F/s, then they need to be adjusted to GAAP or IFRS before they can be translated/remeasured. The mechanics of these adjustments is beyond the scope of the CPA exam though.

[Nami]

Thank you a lot @chandler.

The method of investee company is GAAP (i.e. Japan GAAP). They use FIFO (Inventory), Double declining (Depreciation).

Does this mean the parent company need to adjust to U.S.GAAP ? if so, is it possible where I can find the guideline ?

Illinois CPA 02/15

[Anonymous]

So the use of FIFO and Double declining depreciation in itself is in accordance with U.S. GAAP, so those two specific items would not likely need to be adjusted. There might be other differences between Japan and U.S. GAAP that would need to be reconciled. Not sure on authoritative literature for the matter.

[Nami]

Thank you! That is so helpful. I will try to find a reference that parent company doesn't need to have accounting adjustment. I couldn't find it on FASB website.

When you have a chance, If it wouldn't bother you, where I can find the reference for this or What words I should search for?

Illinois CPA 02/15

[Nami]

Thank you! That is so helpful.

When you have a chance, if this is not too much asking, where I can find the reference for this or What words I should search for? I am trying to find a reference that parent company doesn't need to have accounting adjustment. I couldn't find it on FASB website.

It seems that SOX requires a parent company to have accounting adjustment in investee to U.S.GAAP…Should there be any concern without accounting adjustment ?

Illinois CPA 02/15

[Anonymous]

Not sure exactly what you are looking for, but you probably need to look in the codification. Parent companies WILL need to adjust foreign subsidiaries to US GAAP if they are not already in it. This needs to happen before re measurement or translation. It sounds as if your purpose is for other than the CPA exam in which case I am afraid my working knowledge of foreign transactions is probably not sufficient.

[Nami]

Thank you for your times. I appreciate your help.

Illinois CPA 02/15

[Author]

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