INTELLECTUAL PROPERTY ASPECTS OF DOING BUSINESS IN CHINA

Transcription

1 From PLI s Online Program FAS 161 and FAS 133: Where Are We Now and Where Are We Going 2008? # INTELLECTUAL PROPERTY ASPECTS OF DOING BUSINESS IN CHINA Elizabeth Chien-Hale Institute for Intellectual Property in Asia Copyright 2007 Attachment I: Copyright 2006 Peter K. Yu. Reprinted with permission of the author Attachment II: Copyright 2005 Peter K. Yu. Reprinted with permission of the author.

2 Summary of FASB Statement No. 161 May 6,

3 Summary? Applies to all derivative instruments, including bifurcated derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) and related hedged items accounted for under Statement 133? Requires entities to provide transparency about:? How and why an entity uses derivative instruments? How derivative instruments and related hedged items are accounted for under Statement 133? How derivative instruments and related hedged items affect an entity s financial position, financial performance, and cash flows? Effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (i.e., first quarter 2009 for calendar year-end companies). Early application is encouraged, as are comparative disclosures for earlier periods, but neither are required? Aligned with the SEC market risk disclosures May 1, 2008 Page 2

4 Qualitative and Quantitative Requirements? Qualitative disclosures about objectives and strategies for using derivatives by primary underlying risk exposure (e.g., interest rate, credit or foreign exchange rate) and by purpose or strategy (i.e., fair value hedge, cash flow hedge, net investment hedge, and nonhedges)? Information about the volume of derivative activity? Quantitative tabular disclosures about statement of financial position location and gross fair value amounts of derivative instruments, statement of financial performance and other comprehensive income (OCI) location and amounts of gains and losses on derivative instruments by type of contract (e.g., interest rate contracts, credit contracts or foreign exchange contracts)? Specific disclosures related to fair value hedges and cash flow hedges (consistent with previous requirements)? Disclosures about credit-risk-related contingent features and concentrations of credit-risk in derivative agreements (FAS 107) May 1, 2008 Page 3

5 Qualitative Requirements? How and why an entity uses derivative instruments? How derivative instruments and related hedged items are accounted for under Statement 133? How derivative instruments and related hedged items affect an entity s financial position, financial performance, and cash flows? The entity s objectives for holding or issuing those instruments? The context needed to understand those objectives? The entity s strategies for achieving those objectives? Information about the volume of derivative activity May 1, 2008 Page 4

6 Quantitative Requirements? Tabular disclosure of the location (i.e., line item caption) and fair value of derivative instruments reported in the statement of financial position? The fair values of these instruments are required to be presented on a gross basis, even when the instruments are subject to master netting arrangements and qualify for net presentation pursuant to FIN 39.? Cash collateral payables and receivables associated with the derivatives are not permitted to be added to or netted against the fair value amounts.? The fair value amounts are required to be presented as separate asset and liability values segregated between designated, qualifying Statement 133 hedging instruments and those that are not, by type of contract (e.g., interest rate contracts, credit contracts, commodity contracts, equity contracts, foreign exchange contracts, etc.). May 1, 2008 Page 5

7 Quantitative Requirements? Tabular disclosure of the location (i.e., line item caption) and amount of the gains and losses on derivative instruments and related hedged items reported in the statement of financial performance (or the statement of financial position for items initially recognized in OCI, when applicable)? Information about hedged items can be presented in a tabular or nontabular format? Gains and losses are required to be segregated in the table by type of contract (e.g., interest rate contracts, commodity contracts, foreign exchange contracts, etc.) for the following items:? Statement 133 fair value hedge instruments and related hedged items? The effective portions of Statement 133 cash flow hedges and net investment hedges that were recognized in OCI? The effective portions of Statement 133 cash flow hedges and net investment hedges that were originally reported in OCI and reclassified to earnings in the current period? The portion of Statement 133 cash flow hedges and net investment hedges representing (i) the amount of the hedges ineffectiveness and (ii) the amount, if any, excluded from the assessment of hedge effectiveness? Non-designated or qualifying Statement 133 hedging instruments May 1, 2008 Page 6

8 Trading Exemption? Provides for a limited exemption for derivatives that are not designated or qualifying as hedging instruments under Statement 133, if an entity s policy is to include these instruments in its trading activities? Included in its trading book that includes both derivative and nonderivative or cash instruments? Provided as disclosing the gains and losses only on derivative instruments included in a dealer s trading portfolio would not be meaningful to the users of the financial statements (and could even be misleading) because the offsetting losses and gains on the nonderivative instruments included in the same trading portfolio are not disclosed? An entity may elect to not provide the quantitative statement of financial performance tabular disclosures for those derivative instruments included in trading activities provided that the entity instead makes an even broader quantitative disclosure for its entire trading book May 1, 2008 Page 7

9 Credit-Risk-Related Contingent Features? Provides important information about the timing or likelihood of the contingencies being trigged, as well as the cash effect to the entity if the contingencies were triggered, and the magnitude of such contingencies. Provides better information on an entity s liquidity, if such contingencies are triggered.? The existence and nature of such features and the circumstances in which the features could be triggered in derivative instruments that are in a net liability position at the end of a reporting period (e.g., a credit downgrade of the entity)? The aggregate fair value amounts of such derivative instruments? The aggregate fair value of assets that are already posted as collateral at the end of the reporting period and (1) the aggregate fair value of additional assets that would be required to be posted as collateral and/or (2) the aggregate fair value of assets needed to settle the instrument immediately, if the credit-risk-related features were triggered at the end of the reporting period. May 1, 2008 Page 8