SOX 404 Exemption for Small Companies
November 9th, 2009
On November 4, 2009, the House Financial Service Committee approved an amendment which will permanently exempt small companies (non-accelerated filers) from requirements of Section 404(b) of Sarbanes-Oxley Act.
Under Section 404(b), companies are required to receive an auditor attestation on the effectiveness of their internal controls over financial reporting. The compliance requirement is particularly burdensome for small companies with market capitalization below $75 million dollars, prompting the Securities and Exchange Commission to repeatedly provide extensions to the compliance deadline for these filers since the enactment of Sarbanes-Oxley in 2002; the last and final six-month extension being granted on October 2, 2009.
The bill will have to pass in the full House and Senate, before it can be signed into law by the President. Nonetheless, non-accelerated filers will still be required to review and disclose the state of their internal controls, in accordance with Section 404(a).
Tags: amendment, exemption, non-accelerated filers, SEC, SOX 404
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New SEC Rules to Enhance Investor Confidence and Corporate Governance
July 6th, 2009
On Wednesday, July 1, 2009, the Securities and Exchange Commission announced changes to its policies. The Commission approved three initiatives intended to improve accountability of companies to their shareholders:
1. Shareholder Approval of Executive Compensation of TARP Recipients
Companies that receive financial assistance from the Troubled Asset Relief Program (TARP) will have to provide a separate shareholder vote on executive compensation in proxy solicitations for their annual meeting. Yet smaller reporting companies may be excluded from the requirement to include a compensation discussion and analysis in the proxy statements.
2. Proxy Disclosure & Solicitation Enhancement
Companies will be required to enhance their disclosure on compensation and corporate governance. The new rules will require directors to provide better disclosure of their experience. Companies will have to describe the qualifications of their directors, top executives, and board nominees. Executive compensation disclosure requirements will be also enhanced, including the reporting of annual and option awards to directors and executives. Among other things, companies will have to disclose how their leadership structure was developed, as well as discuss the effect of the companies’ compensation policies on their risk.
3. Discretionary Proxy Voting by Broker-Dealers
Under the new rules, the brokers will not be allowed to vote on behalf of shareholders without instructions to do so. Broker discretionary voting for all election of directors will be eliminated.
The SEC is currently seeking pubic comments regarding the proposed enactments.
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The Adoption of IFRS – A Global Financial Reporting Standard
November 27th, 2008
Issuers listed on a North American stock exchange who are thinking of adopting International Financial Reporting Standards should read this update:
As of March 4, 2008, the SEC is allowing foreign private issuers filing on a Form 20-F to submit financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) that are issued by the International Accounting Standards Board (“IASB”) without a reconciliation to US GAAP. The amendments to Form 20-F and Regulation S-X apply to financial statements for fiscal years ending after November 15, 2007, and to interim periods within that fiscal year that are filed on or after March 4, 2008.
Canadian regulators (through the Canadian Securities Administrators, “CSA”) , jointly with the Accounting Standards Board, plan to implement IFRS by January 1, 2011, at which time IFRS will become mandatory in Canada for fiscal periods ending after January 1, 2011. This will benefit Canadian registrants required to file with the SEC by allowing them to prepare a single set of financial statements without incurring the costs of reconciling between US and Canadian GAAP. The CSA is considering amending National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency to reference IFRS as an alternative to Canadian GAAP in the CICA Handbook, the reference manual governing Canadian GAAP used by Canadian auditors.
The CSA has not yet determined whether to accept the use of IFRS by Canadian issuers filing in Canada before January 1, 2011.
Canadian registrants who are currently SEC registrants have the option of using US GAAP in their domestic filings in Canada, but are not currently permitted to file domestic filings using IFRS.
The CSA released a Concept Paper (CSA Concept Paper 52-402) on February 13, 2008 discussing a number of issues, including a weighing of the pros and cons of allowing early adoption of IFRS by Canadian registrants prior to January 1, 2011. In Brief, the CSA stated that on balance it believes early adoption is favourable and the benefits (reduced compliance costs for some registrants and increased knowledge of IFRS by investors, regulators, issuers, auditors, educators, etc.) outweigh any negative implications (reduced comparability of financial statements; confusion on the part of investors caused by adoption a third permissible financial reporting standard until January 1, 2011; and lack of expertise in Canada on the part of accountants, executive officers, directors, auditors and regulators respecting IFRS)
The CSA has requested public input on the proposed amendments concerning IFRS, including early adoption prior to the proposed mandatory date of implementation currently set for January 1, 2011. More information can be found at the following link:
http://www.csa-acvm.ca/html_CSA/news/08_06_comment_IFRS.htm
Tags: accounting standards, amendment, CSA, Form 20-F, IASB, IFRS, Regulation S-X, regulators, SEC
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