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New Global Offerings Services newsletter

25 May 2007

We have posted the April 2007 Edition of the Deloitte Global Offerings Services Newsletter.

Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. The GOs Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications.
Click for April 2007 Newsletter (PDF 135k).
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SEC approves new internal control reporting guidance

24 May 2007

The US Securities and Exchange Commission has unanimously approved interpretive guidance to help public companies strengthen their internal control over financial reporting while reducing unnecessary costs, particularly at smaller companies.

The new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley Act of 2002 by focusing company management on the internal controls that best protect against the risk of a material financial misstatement. The guidance is based on two broad principles:
  • Management should evaluate whether it has implemented controls that adequately address the risk that a material misstatement in the financial statements would not be prevented or detected in a timely manner.
  • Management's evaluation of evidence about the operation of its controls should be based on its assessment of risk.
Under the guidance, management can align the nature and extent of its evaluation procedures with those areas of financial reporting that pose the highest risks to reliable financial reporting (that is, whether the financial statements are materially accurate). As a result, management may be able to use more efficient approaches to gathering evidence, such as self-assessments, in low-risk areas and perform more extensive testing in high-risk areas. The SEC believes that by following these two principles, companies of all sizes and complexities will be able to implement our rules effectively and efficiently. Click for Press Release (PDF 36k).
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Proposal to require IFRSs for all listed companies in Brazil

21 May 2007

The Brazilian Securities and Exchange Commission has published an Exposure Draft of a proposal to require all companies listed on the BOVESPA (Sao Paulo Stock Exchange) to publish consolidated financial statements fully compliant with IFRSs starting with financial years ending 31 December 2010. Earlier adoption would be encouraged.

An accounting standards board was formed in Brazil in August 2006, called Comite de Pronunciamentos Contabeis (CPC) – the Committee for Accounting Pronouncements. Its mandate clearly states that its mission is to converge Brazilian accounting requirements towards IFRSs. CPC was formed by agreement of six founding members:

  • ABRASCA (the association of the Brazilian listed companies),
  • APIMEC (the association for the analysts),
  • BOVESPA (the Stock Exchange),
  • CFC (the Federal Council of Accounting),
  • IBRACON (the Institute of Independent Auditors), and
  • FIPECAFI (the accounting research foundation, representing the academics.

In 2006, the Central Bank of Brazil formally decided that any bank required by law or regulation to publish financial statements in Brazil (be they domestic owned or foreign owned) will have to prepare and publish consolidated financial statements in full compliance with IFRSs starting with years ending 31 December 2010. For that purpose, the Central Bank disclosed in March 2006 that its technical departments had until 31 December 2006 to fully list all banking regulations still in force relating to financial reporting, consolidate them in a single document, and come up with recommendations of changes to converge to IFRSs and the legal procedures necessary. Such legal procedures might involve revoking the ruling by the Central Bank, revising it at the level of the National Monetary Council (that sits above Central Bank in certain issues), or eventual changes in law that would then be proposed by the President of the Republic to Congress.

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SEC Chairman discusses issues relating to IFRSs

20 May 2007

In an Address to the Security Traders Association 11th Annual Washington Conference, US Securities and Exchange Commission Chairman Christopher Cox spoke about the benefits of global accounting standards and some of the pitfalls in achieving those benefits.

Here is an excerpt:

The vision behind International Financial Reporting Standards is that a single worldwide set of standards would permit investors anywhere on earth to benefit from a high level of comparability and a consistently high level of quality in financial reporting. It would eliminate the need for investors and analysts to try to understand financial statements that are prepared using different accounting standards from many jurisdictions, and it would eliminate one of the significant barriers to raising capital outside one's borders. IFRS promises to integrate our markets, but that promise is jeopardized unless IFRS is applied faithfully and consistently across all jurisdictions. Regulators have to beware of the impulse to develop nationally-tailored versions of IFRS, and we've got to cooperate with one another in implementing a set of standards that is faithfully and consistently applied.

Click for Full Speech.
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FEI survey shows decline in Sarbanes-Oxley compliance costs

19 May 2007

Financial Executives International (FEI) has published its sixth Sarbanes-Oxley compliance survey, which found that Section 404 (internal controls) compliance costs for large SEC registrants for 2006 were 23% less than comparable 2005 totals.

FEI attributed the reduction to "companies' increased efficiencies in complying with Section 404". Click for Press Release  (PDF 51k). Respondents to the survey made a number of positive comments about SOX 404:
  • 60% agreed that compliance with Section 404 has resulted in more investor confidence in their financial reports.
  • 46% agreed that financial reports are more accurate.
  • 48% agreed that financial reports are more reliable.
  • 34% agreed that compliance with Section 404 has helped prevent or detect fraud.
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Initiative to strengthen auditing and financial reporting in US

18 May 2007

US Secretary of the Treasury Henry M. Paulson Jr. has announced initiatives "to enhance US capital markets' competitiveness, focused on strengthened financial reporting and a more sustainable and transparent auditing profession".

The initiatives are part of an ongoing effort to address the issues affecting US capital markets competitiveness. Initiatives announced by Mr Paulson are set out below and include elimination of the IFRS-US GAAP reconciliation:
  • Provide Investors with A Transparent and Sustainable Auditing System. The Treasury Department intends to charter a non-partisan committee to develop recommendations to consider options available to strengthen the industry's financial soundness and its ability to attract and retain qualified personnel. Treasury has asked former SEC Chairman Arthur Levitt, Jr. and former SEC Chief Accountant Donald T. Nicolaisen to serve as co-chairs for this public forum.
  • Gain Better Understanding of Reasons for Increasing Financial Restatements. Restatements have soared during the past decade from 116 in 1997 to 1,876 in 2006. Treasury intends to commission a rigorous analysis of the factors driving financial restatements and their impact on investors and the capital markets. Results of the analysis will be made public upon completion.
  • Enhance Financial Reporting US Generally Accepted Accounting Principles are comprised of more than 2000 individual pronouncements issued by various regulatory bodies. Investors often seek information not provided under financial reporting requirements. The Treasury Department is supportive of the SEC and the Financial Accounting Standards Board's efforts to enhance financial reporting transparency and accessibility for investors.
  • Streamline Accounting Requirements to Encourage International Companies to List on U.S. Exchanges and Increase Investor Opportunities US public markets should not be closed off to companies that adhere to high quality internationally accepted accounting standards. The Treasury Department is supportive of the SEC's action to eliminate the US GAAP reconciliation requirement by 2009 of International Financial Reporting Standards reporting companies and the continued convergence of US GAAP and IFRS.
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Notes from Day 4 of the May 2007 IASB meeting

18 May 2007

The International Accounting Standards Board held its May 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Friday 15-18 May 2007.

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SIC 7 Introduction of the Euro will have new relevancy

18 May 2007

The European Commission has proposed that Cyprus and Malta be approved to adopt the euro on 1 January 2008, joining the 13 current euro countries.

The European Central Bank has made a similar recommendation. EU Finance Ministers will reach a final decision in July after consultation with the European Parliament and a discussion by European leaders at the June EU Summit. Interpretation SIC 7 Introduction of the Euro provides guidance on accounting for an entity's transition to the euro. It was issued in 1998 in anticipation of the initial use of the Euro as an accounting currency in 1999 and as a circulating currency in 2002.
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Notes from Day 3 of the May 2007 IASB meeting

18 May 2007

The International Accounting Standards Board held its May 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Friday 15-18 May 2007.

Correction list for hyphenation

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