The San Francisco Chronicle's Susan Slusser has posted a fairly detailed account of all that has happened with regards to A's negotiations with Hisashi Iwakuma (some things mentioned here before, some not). Don Nomura, Iwakuma's agent, has also tweeted a number of messaging detailing his side of the story (1, 2, 3, 4, 5, 6, 7, 8).
In a nutshell, Nomura's tweets mention that the A's compared Iwakuma to pitchers like Kei Igawa and Colby Lewis while he felt Hiroki Kuroda and Daisuke Matsuzaka were more in line with reality. It seems the A's were also averaging their bid money (US$19.1M according to Nomura's tweets) into Iwakuma's salary. That means the A's essentially considered their 4-year deal to be worth US$34.35M (average 8.6M a year) instead of US$15.25M (3.81M a year).
The A's then issued an ultimatum on Saturday and it seems the A's are upset with Nomura because they think he's only trying to get more money (more than US$9M) while Nomura is saying that he wasn't asking for an increase in money, but a decrease in years (from 4 to 3).
Slusser's report is more or less the same, but with slightly different comparables (Matsuzaka and Barry Zito were mentioned by Iwakuma's camp and the same Lewis and Igawa were mentioned by Oakland) and figures. Slusser also mentions that she heard rumors it might take around $12M a year sign Iwakuma.
Incidentally, sports and news shows in Japan are chalking the problem up to the offer being too low (not enough of an increase over Iwakuma's 2010 salary) and the A's not having enough money to afford Iwakuma.