IFRS For All U.S. Cos. in Six Years?
The SEC on Wednesday floated a plan that could have all U.S. companies using International Financial Reporting Standards by 2014. Approximately 110 multinationals could be given the opportunity to use IFRS sooner, voluntarily, by 2010; mid-sized and smaller companies would make the transition by 2016 at the latest. Complete details and analysis coming in the Sept. 3 edition of Compliance Week.
Corporate lawyers are up in arms over proposed reforms to accounting for contingencies, which could force companies to disclose much more about potential losses from litigation. FASB is pondering rules that would mandate disclosure of how contingencies like lawsuits could hit cash flows, and a flood of comments say such a move would only hurt investors in the long term. “There are a whole bunch of reasons this is a problem,” says Susan Hackett, general counsel for the Association of Corporate Counsel. Full coverage and excerpts of the proposals are inside.
Form D, one of the last paper filings still used by the SEC, staggers into the Internet era next month. Companies will have the option of filing Form D electronically starting Sept. 15, and electronic filing will be mandatory as of next March. Deciding when to go electronic will largely depend on a company’s individual circumstances, says Linda DeMelis of the law firm Heller Ehrman, and many may not like the instant visibility. “There’s not really any perceived advantage to e-filing early,” she says. A detailed review of the new Form D is inside.
In the globalized world of modern business, investigating possible violations of the Foreign Corrupt Practices Act can be a challenge even for seasoned veterans. “It’s very rare that [a potential FCPA issue] reaches out and grabs you,” says John Soriano, vice president of compliance at equipment maker Ingersoll-Rand. “There usually isn’t a paper trail for a bribe to a government official for the explicit purpose of gaining an advantage.” Thankfully, a cheat sheet exists. Inside, legal experts review the five standard elements of an FCPA violation.
Collective Scienter Idea Keeps on Ticking
Yet again, collective scienter is proving to be the unwelcome legal theory that refuses to die. A federal appeals court recently ruled against shareholders in a securities lawsuit arguing collective scienter (that is, a non-specific, company-wide intent to commit fraud)—but also said such a standard does exist and can, at least in theory, be met. The ruling could have implications for future shareholder lawsuits related to the sub-prime mortgage crisis, according to a bulletin from the law firm Skadden Arps. Details are inside.
The SEC is preparing a flurry of new rules this fall: fixes to financial reporting, XBRL, e-proxy rules, and much more. John White, director of the Division of Corporation Finance, outlined the Commission’s priorities in a speech last week; details inside. Also in The Filing Cabinet this week: the SEC fired a shot across the bow of companies and directors recently, with a rare enforcement action against a director for impairing an audit firm’s independence. The Commission also wants comment on a new plan to police insider trading.
Upcoming Webcasts on Compliance Week
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EPS Tweaks; Fraud Guidance; GAO on Taxes
FASB and its international counterpart have published new proposals to converge rules on calculating earnings per share. Most notably the proposals target convertible securities and how they affect diluted EPS; details are inside. Also in the Accounting Industry Update this week: a new guide compiled by three professional associations offering the best practices for preventing fraud; and a new GAO study shows a significant tax gap between foreign and U.S. companies.
Database software giant Oracle Corp. dominated Compliance Week’s monthly list of the largest equity awards granted in July. Seven of the 12 largest equity grants last month went to Oracle, starting with famed CEO Larry Ellison, who was granted 7 million options with an exercise price of $20.73 and an implied face value of $145.1 million. Other Oracle executives received grants on July 3 with face values ranging from $103.6 million down to $20.7 million. More, including a spreadsheet of the month’s largest awards, is inside.
Public policy groups are mounting a full-court press to reform corporate reporting. Above all, they want more disclosure of non-financial risks and performance indicators. Compliance Week Columnist Lou Thompson, former CEO of the National Investor Relations Institute, says companies should “read the tea leaves” and start providing more forward-looking data that focuses on the non-financial risks and indicators of growth. What sort of information is that? Thompson offers some examples inside.
At a recent forum on enterprise risk management, senior executives shared their experiences about the challenges of developing, implementing, and gaining the benefits of ERM. This week, Compliance Week Columnist Rick Steinberg, lead author of COSO’s Enterprise Risk Management—Integrated Framework, shares the insights gleaned from the forum. “A question on everyone’s mind is to what extent an ERM process, once installed, will remain relevant in changing times bringing new challenges,” he writes. More is inside.
Swiss banking giant UBS, under fire for peddling credit instruments many regulators now say the bank knew to be bogus, has hired Markus Diethelm as its new general counsel. Diethelm is the former chief legal officer at insurer Swiss Re, and his appointment follows the departure of the bank’s North American general counsel, David Aufhauser. Aufhauser’s departure came on the heels of a federal investigation and lawsuit for UBS’s role in the collapse of the auction rate securities market. More governance industry gossip is inside.
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