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Friday, February 04, 2005

Europe seeks US deadline extension

European companies are stepping up their efforts to secure more time to comply with the most complex and expensive provisions in the US Sarbanes Oxley legislation on accounting and corporate governance.

The UK's Confederation of British Industry will today send a letter to the Securities and Exchange Commission, the chief US financial regulator, asking for a significant extension to the deadline for non-US companies to comply with the legislation's provisions on internal controls.

If granted by the SEC, it would mean many European companies would not have to implement section 404 of the legislation, which requires controls to guard against fraud, until 2006.

The SEC is currently proposing that non-US companies must comply with section 404 for fiscal years ending after July 15 2005.

But William Donaldson, SEC chairman, said in a speech in London last month that he had asked the regulator's staff to consider “whether to recommend that we delay the effective date of the internal control on financial reporting requirements for non-US companies”.

Digby Jones, CBI director general, is expected to say in a letter to Mr Donaldson that non-US companies should not have to comply with section 404 until their fiscal years ending after December 31 2005.

About 300 European companies file reports with the SEC and will therefore have to comply with section 404.

More than 100 are UK based, and many of the companies have fiscal years ending on December 31.

European companies were pleased by Mr Donaldson's conciliatory speech in London last month, but they are keen to work out a better deal on extra time to comply with section 404 than some US companies recently did.

Large and medium-sized US public companies have to comply with section 404 for fiscal years ending after November 15 2004.

The SEC announced some limited concessions on November 30 when it said it would give some medium-sized companies an additional 45 days to file their reports on internal controls with the regulator.

European companies are already grappling with the European Union's requirements that they switch from national to international accounting standards this year.

The Sarbanes-Oxley provisions were introduced after a string of corporate scandals involving US companies.

Rhian Chilcott, head of the CBI office in Washington, said: “European companies have a uniquely difficult year in 2005, with the switch to international accounting standards.

“For this reason, we would like the SEC to delay implementation of section 404 for foreign companies until after December 31 2005.”

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