completely transparent status bar and navigation bar on lollipop

Update

You can achieve the same effect programmatically on KitKat and afterward by setting the FLAG_LAYOUT_NO_LIMITS flag inside the Window.

if (Build.VERSION.SDK_INT >= Build.VERSION_CODES.KITKAT) {
            Window w = getWindow(); // in Activity's onCreate() for instance
            w.setFlags(WindowManager.LayoutParams.FLAG_LAYOUT_NO_LIMITS, WindowManager.LayoutParams.FLAG_LAYOUT_NO_LIMITS);
        }

If you set a background resource (like a color or a picture) to your layout, you will see the color or picture “below” the status bar.

<item name="android:windowDrawsSystemBarBackgrounds">true</item>
<item name="android:statusBarColor">@color/primary_dark</item>

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Original Answer

It looks like android:windowTranslucentStatus and android:windowTranslucentNavigation should be true instead of false

<resources>
    <style name="Theme" parent="android:Theme.Material.Wallpaper.NoTitleBar">
        <item name="android:statusBarColor">@android:color/transparent</item>
        <item name="android:navigationBarColor">@android:color/transparent</item>
        <item name="android:windowTranslucentStatus">true</item>
        <item name="android:windowTranslucentNavigation">true</item>
    </style>
</resources>

Also, your transparent activity / container layout needs this property set:

android:fitsSystemWindows="true"

[Source][1]
[1]: https://stackoverflow.com/a/29311321/1549700