Compliance Blog

Old potholes with SOX may be resolved, but new ones are on the horizon. With some tricky accounting areas to be resolved, look for the accounting news to take on a different tone in 2006 per the Fitch Report.

An excerpt of the article is here:
Fitch '06 Outlook: Calm on the Accounting Front
New York and London (Jan. 25, 2006) - Fitch Ratings expects a calmer 2006 for the global accounting industry following a large number of restatements in 2004 and 2005.
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In its new report, "Accounting and Financial Reporting Risk: 2006 Global Outlook - Serenity Now?," the ratings agency said that companies, standard-setters and auditors are continuing to improve implementation of a number of new standards, but questions of interpretation still leave open the potential for accounting risk.

The Fitch report also explores how financial information may be affected by the dwindling number of major audit firms, issuers' ability to retain quality auditors and the changing nature of the auditor-management relationship.

In terms of flexible interpretation of accounting standards, among the problematic areas identified by Fitch are accounting rules for:

• Pensions and other post-employment benefits;
• Stock options;
• Interpretation of cash flow statements;
• Merger and acquisition accounting;
• Derivative and hedge accounting;
• Securitization accounting;
• Impairment charges; and,
• Lease accounting-related issues.

Through the first 10 months of 2005, Fitch noted that 971 U.S. public companies restated their earnings, compared to 619 for all of 2004. Fitch expects much less restatement activity, with the main effect of the Sarbanes-Oxley Act's internal controls provisions having been seen in 2005.

However, outside the United States, the report noted that wide-scale reporting will be made under International Financial Reporting Standards for the first time -- likely resulting in different interpretations of the standards, and leading to restatements in the future. For the complete article, click here.

To help your company effectively and rapidly comply with Sarbanes-Oxley, see www.issuescentral.com to learn more about the Compliance Playbook(tm) and to learn more about MI 52-109/52-111 or Sarbanes Oxley for Canadian filers see www.compliancepartner.ca

When standards are high, others jump into the fold. Private companies are learning that it is easier to either get purchased or receive financing if they are voluntarily SOX compliant. With many companies beginning their third year of compliance with Sarbanes-Oxley, SOX has become part of public company culture. It has brought a control awareness to companies and re-shaped policies and procedures.

For an excerpt on an article, see...
"Fast-growing private US companies are voluntarily adopting Sarbanes-Oxley principles
Although most CEOs of fast-growing private US companies agree that fewer government regulations are better, more than one in four is borrowing ‘best practices’ from the Sarbanes-Oxley compliance experience of public companies—often to make their business more attractive for public financing or as an acquisition candidate. Many remain concerned however that regulatory compliance, whether voluntary or mandated, is overly costly.

Learning from others' experience. CEOs of fast-growing privately-held businesses are more positive than negative in their assessment of how the Sarbanes-Oxley Act has affected corporate governance and transparency in the public company sector.... one in four of these private businesses have voluntarily adopted Sarbanes ‘best practices..." For the complete article, click here.

To learn more about how your company can effectively comply with Sarbanes-Oxley, see www.issuescentral.com to see a walk through of the Compliance Playbook(tm).

Wow, who would have thought. The French Government is trying to assist French cross listed companies in their pursuit of Sarbanes-Oxley Compliance. This is good news. Improved governance should be a worldwide cause. Good work!

An excerpt from an article:
"Faegre advises on Sarbanes-Oxley guidelines
The French data protection watchdog has issued guidelines designed to help companies comply with the Sarbanes-Oxley Act, with Faegre & Benson assisting with the project.
The Commission Nationale de l'Informatique et des Libertés (CNIL) issued the advice in December 2005 after extensive consultation.

The guidelines formalise French companies' whistleblowing obligations under data protection law, and also institute a single authorisation procedure for online whistleblowing.
Faegre partner Robert Bond was asked by the CNIL to respond to the draft guidelines and suggest improvements. Hunton & Williams' Brussels office produced a response for the International Chamber of Commerce.

The finalised guidelines allow companies to set up whistleblowing action plans and have them approved by the CNIL by return of post following a declaration that the plans comply with the guidelines.

Previously, full dossiers had to be submitted for approval, necessitating a lengthy wait."

For your company to cost effectively comply with Sarbanes-Oxley, see www.issuescentral.com to learn more about Compliance Playbook(tm) or see www.compliancepartner.ca to see information on Compliance Partner(tm).

I had the pleasure to meet Alan Beller during my attendance at various SEC Small Business Advisory Committee Meetings. Alan is an extremely talented individual and very fair. His work and quiet way of achieving will be missed. Best of luck Alan.

Most of the former Donaldson team is gone now. Former Chairman Donaldson help put investor confidence back into US markets. Along with Donaldson, folks like Beller and Nicolaisson helped lead the charge and do some heavy lifting. They will be missed.

Hopefully Chairman Cox will continue the good work of these fine people.

An excerpt from an article on Beller is here:
"Beller to Leave SEC
One of the SEC's most influential individuals outside of the five commissioners is returning to the private sector.
Stephen Taub, CFO.com
January 11, 2006
Alan Beller, the Securities and Exchange Commission's director of the Division of Corporation Finance and one of the SEC's most influential individuals outside of the five commissioners, is returning to the private sector.
Under the leadership of Beller, the corporate finance division "produced the fastest-paced and most far-reaching corporate governance, financial disclosure, and securities offering reforms in commission history," the SEC wrote in its announcement. The division reviews the reports filed by more than 12,000 public companies with the commission.

The SEC credited Beller, who also holds the title of senior counselor to the commission, with helping to lead some of the early initiatives of chairman Christopher Cox, including proposals to allow Internet delivery of proxy materials; to ease the deregistration process for foreign issuers; to improve disclosure of executive compensation; and to expand use of interactive data to make financial reports more useful for investors." For the complete article, click here.

To see how your company can join the growing customer base for Compliance Playbook(tm) and Compliance Partner(tm) to improve your financial compliance project for Sarbanes-Oxley or MI 52-109/52-111 see www.issuescentral.com or www.compliancepartner.ca to learn more.

Paul Martin's beleagured government just may regret its silly anti-American attacks since the OSC has asked the SEC to investigate leaks concerning the Liberal government's income trust and dividend tax rulings.

Just when they thought they could launch nasty comments and do 5 minute photo opps with former President Clinton and not pay the price, they are surprised. Let's face it the SEC is about as aggressive as it gets. The SEC has 4500 lawyers to look into these types of problems and the OSC has about 45. So when the OSC asks for help, they must think there are grounds.

This way the OSC can do its job but allow the Americans to do the heavy lifting. Additionally, the SEC does not back down so if charges are to be laid, politically the Canadians can say it was the Americans who did it. As an American, I am happy to be part of a government that finds and eliminates corruption. It is a noble cause. Good for the OSC in not backing down.


An excerpt on this topic is here:
SEC probes income trust trading
No further information will be forthcoming, U.S. securities regulator tells NDP MP
Jan. 6, 2006. 07:35 PM
CANADIAN PRESS
OTTAWA — The American securities regulator is taking "very seriously" complaints of insider trading involving Finance Minister Ralph Goodale's November announcement on income trusts.
There is also a signal that the Ontario Securities Commission may be doing the same.
The U.S. Securities and Exchange Commission revealed it is reviewing the matter in an e-mail Thursday to Judy Wasylycia-Leis, the New Democratic Party's finance critic who filed a complaint with the market watchdog last month.
"We are taking your complaint very seriously and have referred it to the appropriate people within the SEC," the market watchdog's legal counsel, Ann H. Sulzberg wrote.
Wasylycia-Leis asked the SEC to investigate a suspicious spike in trading of income trust units and related stocks in the hours before Goodale's Nov. 23 announcement. He announced, after markets closed that day, that he would not be changing the tax treatment of income trusts but would, instead, cut taxes on corporate dividends.
An unusual volume of trading was noticed on the New York Stock Exchange as well as the Toronto Stock Exchange." For the complete article, click here.

If your company needs help to effectively comply with Sarbanes-Oxley in the US see www.issuescentral.com and learn more about the Compliance Playbook(tm) or see www.compliancepartner.ca for Canadian based companies who have to comply with Sarbanes-Oxley or MI 52-109 or MI 52-111.