Monday, February 14, 2005
SEC considers extending compliance deadline
US regulators are considering giving foreign companies an extra year to comply with rules that require them to test and report on their internal controls against fraud.
The Securities and Exchange Commission staff is examining a delay that would mean foreign companies with US listings would not have to comply with the rules, which are required under section 404 of the Sarbanes-Oxley act, until 2006.
Under the existing timetable, foreign companies with US listings are due to comply with section 404 provisions on internal controls from July. However, SEC commissioners may reach a decision on revised compliance dates for foreign companies by the end of this month.
US public companies are busy preparing annual reports that will provide details on the effectiveness of their internal controls at December 31 2004. They have complained about the costs associated with documenting. The SEC staff is considering a delay in section 404 compliance dates for foreign companies, which would mean many of them would not have to give detailed information about their internal controls until annual reports published in early 2007.
Such companies would report on the effectiveness of their controls at December 31 2006.
European companies with US listings have been leading efforts to delay compliance dates on section 404 because they are focused this year on the change to international accounting standards.
Most European companies have a fiscal year end that mirrors the calendar year. Under the existing SEC timetable, they would have to give information on the effectiveness of internal controls at December 31 2005. William Donaldson, SEC chairman, said he was considering a “meaningful postponement” for foreign companies, which the SEC describes as foreign private issuers.
Donald Nicolaisen, SEC chief accountant, said: “For foreign private issuers with a calendar year end, the staff is considering a delay that would require them to report on their internal controls over financial reporting as of December 31 2006.”
Mr Nicolaisen said he was keen to get the second-year experiences of US companies that are already having to comply with section 404 before foreign private issuers have to report on their internal controls.
posted by Brian Moran @ 9:35 AM