Compliance with Section 404 of the Sarbanes-Oxley Act of 2002

The SEC has proposed for comment guidance on complying with the requirements of Section 404. Section 404 requires a management evaluation and report on internal controls and related auditor's report on compliance with internal controls. In 2003, the Commission adopted implementation rules for Section 404 regarding management's evaluation, but those rules did not prescribe any specific method or set of procedures for management to follow in performing its evaluation. The current proposal would amend the 2003 rules by allowing management to focus its evaluation of internal controls on those areas that pose the greatest risks to reliable financial reporting. The Commission also proposed amendments to Regulation S-X to clarify the auditor's reporting requirement pursuant to Section 404(b) of the Sarbanes-Oxley Act. The proposals will have a 60-day comment period. A related auditing standard is to be proposed next week by the Public Company Accounting Oversight Board.

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The Commission proposed new rules governing when a foreign private issuer may deregister its securities under the Securities Exchange Act of 1934 and cease making filings with the Commission. The proposed deregistration thresholds are based solely on trading volume, not on the percentage of US holders. Comments are requested in 30-days, and the Commission expects to adopt final rules in the first quarter of 2007.

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Beyond the many uses that companies, investors and analysts will make of interactive data, it's easy to imagine more that the world can do with this powerful new capability. As Sir David and I follow the roadmap to 2009 that our agencies have laid out, by which we hope to eliminate the requirement that reports using International Financial Reporting Standards be reconciled to U.S. GAAP, it is already possible to imagine that XBRL taxonomies – written without bias toward any particular set of accounting rules – could be used to instantly translate any given set of financial data from one accounting system to another. So even if the world is never quite possessed of a global accounting Esperanto, we will still be able to speak the same language.