The Securities and Exchange Commission voted unanimously today to publish a statement updating its position on the possible adoption by U.S. companies of International Financial Reporting Standards that keeps a 2011 deadline for making a final decision on whether or not to make the move, but would delay adoption until at least 2015.

Under the statement approved at a Feb. 24 open meeting, if ongoing convergence projects are successfully completed and a forthcoming SEC staff work plan is executed, the Commission would still make a decision in 2011 on whether to adopt IFRS for all U.S. companies.

However, based on views by commenters on its 2008 proposed roadmap for IFRS adoption that companies would need a four- to five-year timeframe to make the change in their financial reporting systems to incorporate IFRS, SEC officials said if they decide to move forward with IFRS adoption, U.S. companies wouldn’t report under IFRS any earlier than 2015.

The 2008 proposed roadmap for IFRS adoption contemplated letting some U.S. companies use IFRS as soon as filings for fiscal years ending on or after Dec. 15, 2009, and would’ve mandated adoption on a phased-in schedule starting in 2014.

Under today’s statement, the SEC isn’t pursuing the early use option at this time, but said it may consider it later. It also left open the question as to how issuers would adopt IFRS—for instance whether it would be mandated or voluntary and phased-in or all at once.

The statement directs the SEC staff to gather information to help the Commission evaluate the impact that the use of IFRS by domestic companies would have on the U.S. securities market, with public progress reports beginning by October 2010 on a staff work plan and on the status of convergence efforts by U.S. and international standard setters.

The Financial Accounting Standards Board, which oversees U.S. Generally Accepted Accounting Principles, and the International Accounting Standards Board, which sets IFRS, set a 2011 target date for a completion of their current convergence projects. The Commission said it will continue to monitor the progress of those efforts.

According to an SEC fact sheet, the staff work plan will focus on concerns raised by commenters including:

• Determining whether IFRS is sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.
• Ensuring that accounting standards are set by an independent standard-setter and for the benefit of investors.
• Investor understanding of and education about IFRS, and how it differs from U.S. GAAP.
  Understanding whether U.S. laws or regulations beyond the securities laws, such as tax laws and regulatory reporting, would be affected by a change in accounting standards.
• Understanding the impact on large and small companies, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
• Determining whether the people that prepare and audit financial statements are sufficiently prepared, through education and experience, to make the conversion to IFRS.

Roughly a third of the capital markets outside of the United States use IFRS, according to the SEC. Foreign private issuers have been permitted since 2008 to file financial statements with the SEC prepared in accordance with IFRS without reconciling to U.S. GAAP.

“Incorporating IFRS into our financial reporting system would involve a significant undertaking,” SEC Chairman Mary Schapiro said in remarks during the meeting. “We must carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.”

At the same meeting, the SEC voted 3-2 to adopt an alternative uptick rule, which amends Rules 201 and 200(g) of Regulation SHO to impose short sale restrictions.

Under the rule, which was opposed by Republican Commissioners Kathleen Casey and Troy Paredes, a circuit breaker would be triggered for a stock any time its price drops 10 percent or more from the prior day’s closing price in one day, and short selling in that security would only be allowed if the price is above the current national best bid.

The alternative uptick rule would apply to short sale orders in that stock for the remainder of the day and the following day. The SEC said the rule generally would apply to equity securities listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.

With convergence front-and-center once again, most finance professionals say they would support the Securities and Exchange Commission’s approval of its proposed roadmap for adopting International Financial Reporting Standards, but the majority think the SEC should push back the mandatory deadline by a year.

That’s according to a survey of more than 150 finance professionals conducted by Deloitte, in which 51 percent of those polled said the SEC should approve the proposed roadmap, but consider pushing back the mandatory deadline a year. Almost 20 percent said the roadmap should be approved “as is.” Only 12 percent said the SEC should reject the proposed roadmap in its entirety.

The SEC approved the use of IFRS for financial reports filed by foreign issuers in 2007. Domestic companies have been awaiting the SEC’s next move on the proposed roadmap, which called for the SEC to decide in 2011 whether to mandate IFRS for U.S. companies beginning in 2014.

While the roadmap appeared to be on the fast track when it was published by the SEC late last year, enthusiam seemed to have waned by the time the comment period closed in April, as the SEC grappled with the financial crisis and criticism of high-profile enforcement failures, and its chairman, Mary Schapiro, raised concerns about the move.

However, recent public statements by SEC officials and global financial leaders at the recent Group of Twenty meeting focusing on the need to work toward a single set of global accounting standards have reignited the discussion about IFRS adoption by the U.S.

In particular, the G-20’s call for accounting standard setters to redouble their efforts to achieve a single set of global accounting standards by June 2011 is expected to increase pressure on the Financial Accounting Standards Board and the International Accounting Standards Board to converge several major standards next year.

According to the Deloitte survey, among those companies that said they put their IFRS assessment plans on hold, 45 percent said the reason was the delay in the SEC’s proposed IFRS roadmap, while 20 percent citing economic challenges or a lack of internal support and resources as the reason. Meanwhile, 26 percent say they didn’t delay their assessment and are currently on track with their IFRS planning efforts.

Meanwhile, only 34 percent of those surveyed say IFRS adoption would make the U.S. more competitive in the global marketplace, while 38 percent say it wouldn’t.

Reminder to NYSE-listed companies: Recent changes to the Exchange’s immediate release policy are now in effect.

Changes to NYSE Rule 202.06 allow companies to disseminate material information by any Regulation Fair Disclosure-compliant method to comply with the immediate release policy, rather than always requiring companies to issue a press release as previously required.

The amended rule also clarifies that timely prior notification to the NYSE regarding such disclosures made shortly before or during market hours is a requirement, not just a recommendation, Tom Shropshire, a partner with the law firm Linklaters notes in a May 12 client alert.

As previously reported, the changes, which bring the NYSE requirement in line with Nasdaq rules, were proposed in an April rule filing. The Securities and Exchange Commission approved the amendments on April 27.

Public disclosure under Reg FD can generally be accomplished by filing or furnishing a Form 8-K with the SEC or through another disclosure method that’s reasonably designed to provide broad, non-exclusionary distribution of the information to the public, such as press releases, conference calls, press conferences, Webcasts, and posting information on corporate Websites or blog posts that meet the Reg FD Website posting requirements, as long as there is adequate notice and access to the public, the alert notes.

While foreign private issuers are exempt from Reg FD, those issuers can now comply with their timely alert policy by any method that constitutes compliance for a U.S. domestic issuer. That means they should be able to satisfy their disclosure obligations by filing a Form 6-K with the SEC, says Shropshire.

“It’s generally a helpful change that recognizes the multitude of forms in which people obtain current information about the companies they invest in,” he tells Compliance Week. “Rather than send everything down the wire to the NYSE … companies can use any number of means they normally have in their arsenal to communicate with investors.”

The final rule also amends Rule 202.06 to clarify that timely notification to the NYSE is required when the announcement of news of a material event or a statement dealing with a rumor which calls for immediate release is made shortly before the opening or during market hours (9:30 a.m. to 5:00 p.m., New York time), the alert states. The purpose of the notification is to allow the Exchange to consider whether trading in the security should be temporarily halted.

Prior to the amendment, the rule recommended, but didn’t require, that the company’s NYSE representative be notified by phone at least 10 minutes prior to release of the announcement.

The notification must inform the NYSE of the substance of the announcement, inform the NYSE of the method by which the company intends to comply with the immediate release policy, and provide the NYSE information to locate the news upon publication. If the announcement is in written form, the company must provide the text of the announcement to the NYSE by e-mail at least 10 minutes prior to its release, Shropshire notes.

Just in time for the weekend, financial reporting executives have some light reading, courtesy of the Securities and Exchange Commission.

The agency has finally posted the long-awaited 206-page adopting release for the rule mandating the use of XBRL technology. The rule, formally known as Interactive Data to Improve Financial Reporting, was approved by the Commission on Dec. 17. It phases in a requirement for issuers that use U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards to provide their financial statements, both to the SEC and on their corporate Websites, in XBRL, as an exhibit to periodic and current reports, registration statements, and transition reports for a change in fiscal year.

Under the final rule, domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion as of the end of the second fiscal quarter of their most recently completed fiscal year—that is, roughly the 500 largest public companies listed in the United States—must comply with the mandate starting with their first periodic filing after June 15, 2009.

All other domestic and foreign large filers using U.S. GAAP (approximately 1,000 more) will be subject to the requirements the following year, beginning with their periodic filings after June 15, 2010. All remaining filers using U.S. GAAP, including smaller reporting companies and all foreign private issuers that use IFRS as issued by the International Accounting Standards Board (roughly 8,700 companies), will comply one year after that.

Financial statement footnotes and financial statement schedules initially will be tagged as blocks of text. After a year, a filer also will be required to tag the detailed quantitative disclosures within the footnotes and schedules and will be “permitted, but not required, to the extent they choose, to tag each narrative disclosure.” The SEC said that change reduced its estimates for detailed tagging in the adopting release by 30 percent to 70 hours for the first filing and 35 hours for subsequent filings.

The SEC estimates the average yearly burden of the requirements over the first three years would be 226 man hours and $27,300 in out-of-pocket expenses per filer.

The SEC also eased the timing of the required Website posting to require filers to post the interactive data exhibit on their corporate Website not later than the end of the calendar day it submitted or was required to submit the exhibit, whichever is earlier. As proposed, Website posting would’ve been required by the end of the business day. The adopting release also clarifies that interactive data must be posted on an issuer’s site for at least 12 months.

The final rule keeps the two proposed 30-day grace periods: one for the issuer’s first interactive data exhibit and another in year two, for the first interactive data exhibit that includes detailed tagging of its footnotes and schedules.

The rule is effective 60 days after publication in the Federal Register.

Compliance Week Will provide readers will full details in upcoming editions.

Just in time for the holidays, large companies got a gift from the Securities and Exchange Commission: Six extra months to comply with the long-awaited new rule mandating the use of interactive data.

At its Dec. 17 open meeting, the SEC voted 4-1, with Commissioner Luis Aguilar dissenting, to adopt amendments that phase in a requirement for companies to provide their financial statements tagged in XBRL, or eXtensible Business Reporting Language, as an exhibit to their SEC filings.

The phase-in schedule adopted requires the first group of approximately 500 companies to comply with the reporting requirement beginning with the first quarterly report on Form 10-Q, or annual report on Form 20-F or Form 40-F, for fiscal periods ending on or after June 15, 2009—six months later than originally proposed back in May. For calendar year-end companies, the first required interactive data would be in connection with their June 30 Form 10-Q.

In year one, the new rules would apply only to domestic and foreign large accelerated filers that use U.S. Generally Accepted Accounting Principles and have a worldwide public float above $5 billion. All other domestic and foreign large accelerated filers using U.S. GAAP would follow in year two. All remaining filers using U.S. GAAP, including smaller reporting companies, and all foreign private issuers that prepare their financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board would comply in year three.

After the phase-in period, new public companies would begin filing interactive data with their first quarterly report on Form 10-Q or annual report on Form 20-F or Form 40-F.

As originally proposed, during the first year of reporting in interactive data, companies will tag their face financial statements and would tag the footnotes and schedules in block text only. After the first year, companies will be required to tag the detailed disclosures within the footnotes and schedules. However, in a change from the proposing release, the final rule permits, but doesn’t require, the tagging of narrative disclosures.

Full details on the final rule are forthcoming in Compliance Week’s Dec. 23 edition.

For those looking for some light reading, the Securities and Exchange Commission has posted the 119-page adopting release for its Foreign Issuer Reporting Enhancements, part of a package of amendments approved Aug. 27 to modernize its rules relating to foreign private issuers.

As Compliance Week reported, most of the amendments are expected to be helpful to issuers. The FIRE amendments require FPIs to file annual reports with the SEC in four months, instead of six; allow issuers to test their eligibility to use the special FPI forms and rules once a year; and eliminate an option that permitted some FPIs to omit segment data from their U.S. GAAP financial statements.

The rule takes effect 60 days after publication in the Federal Register. The compliance dates for the various requirements are detailed on page 2 of the final rule.

The SEC also posted its 187-page Commission Guidance And Revisions To The Cross-Border Tender Offer, Exchange Offer, Rights Offerings, And Business Combination Rules And Beneficial Ownership Reporting Rules For Certain Foreign Institutions.

The changes expand and enhance the usefulness of the cross-border exemptions for business combination transactions and rights offerings and aim to encourage offerers and issuers to permit participation by U.S. security holders on the same terms as other target security holders. Many of the rule changes codify existing interpretive positions and exemptive orders.

The interpretive guidance is effective upon publication in the Federal Register. The final rule is effective 60 days later.

The Securities and Exchange Commission has posted the 74-page adopting release for the amendments to its rule, Exemption From Registration Under Section 12(g) of the Securities Exchange Act Of 1934 for Foreign Private Issuers.

The exemption allows an FPI to have its equity securities traded in the U.S. over-the-counter market without registration under Section 12(g) of the Securities Exchange Act of 1934 based on the submission to the SEC of certain information published by the issuer outside the United States.

The rule amendments, adopted at the SEC’s Aug. 27 open meeting, take effect 30 days after their publication in the Federal Register.

As reported earlier here, the changes will eliminate the current written application and paper submission requirements under Rule 12g3-2(b) by automatically exempting from Section 12(g) an FPI that meets specified conditions, including maintaining a listing of its equity securities in its primary trading market located outside the U.S., and publishing, electronically and in English, specified non-U.S. disclosure documents.

The amendments were one of a trio of rule proposals adopted at the same meeting related to foreign issuers. The others are the Foreign Issuer Reporting Enhancements and the cross-border exemptions.

The Securities and Exchange Commission approved and published for comment an NYSE rule change that waives for foreign companies the application of a listing rule that requires them to be eligible for participation in a direct registration system operated by a securities depository.

While Section 501.00 of NYSE’s Listed Company Manual required that all listed equity securities must be eligible for participation in a direct registration system operated by a securities depository, NYSE noted in its proposed rule change that the laws of some countries prohibit compliance with the rule by some foreign private issuers.

The rule change waives application of the rule for FPIs that submit a letter to the exchange from independent counsel certifying that a home country law or regulation prohibits compliance. All other foreign private issuers are required to comply.

NYSE also modified portion of the section to remove text relating to transition periods that have since expired.

The Securities and Exchange Commission may have spent most of its time last week mapping out a schedule to adopt International Financial Reporting Standards, but it did also vote to update and modernize the disclosure requirements for foreign issuers offering securities in U.S. markets.

The rules adopted Aug. 27 mean foreign reporting companies will be required, after a transition period, to file annual reports with the SEC in four months—two months earlier than currently required, but a month later than the 90 days the SEC initially proposed for accelerated filer FPIs.

The SEC expects the changes to give U.S. investors a better, faster way to get financial information about FPIs. The amendments finalize a trio of proposals published earlier this year; most were adopted substantially as proposed.

SEC Chairman Christopher Cox said the updates to the FPI rules will “encourage cross-border capital flows and eliminate needless barriers to our securities markets, so U.S. investors have better information about the securities of foreign companies.”

Other rule changes—dubbed the Foreign Issuer Reporting Enhancements—will allow foreign issuers to test their eligibility to use the FPI forms and rules once a year, rather than continuously; will require disclosures regarding changes in and disagreements with a company’s certifying accountant in annual reports and registration statements; and revise the annual report and registration statement forms used by FPIs.

Also approved were rule amendments related to Exchange Act Rule 12g3-2(b), which provides an exemption from registration under Exchange Act Section 12(g) for equity securities of an FPI based on the submission of certain non-U.S. information. The revised rules scrap a requirement for those companies to submit a written application and paper disclosures to the SEC, and require them to instead publish specified disclosure documents, in English, online.

To claim the 12g3-2(b) exemption, FPIs must maintain a listing of the subject class of securities on one or more foreign exchanges in one or two jurisdictions constituting its primary trading market, defined to mean that at least 55 percent of the trading in the issuer’s securities took place in no more than two foreign jurisdictions during its most recently completed fiscal year. FPIs must also continue to have no reporting obligations under Exchange Act Section 13(a) or 15(d). Unlike the current rule, the amended rule won’t require issuers to look back 18 months and determine whether they had any active or suspended reporting obligations.

To maintain the exemption, FPIs also have to publish the specified disclosure documents electronically in English on an ongoing basis for subsequent fiscal years. The amendments include a three-year transition period to accommodate currently exempt issuers that would lose the exemption upon the effective date of the revised rule.

Notably, the staff dropped a proposal that would have required that the average daily trading volume of an issuer’s class of equity securities in the United States be no greater than 20 percent of the average daily trading volume of that class on a worldwide basis for its most recently completed fiscal year. That was omitted in the final rule in response to concerns that it would discourage foreign issuers from establishing or maintaining sponsored ADR facilities or otherwise engaging in exempted offerings in the United States.

The SEC also approved rule amendments that expand the ability of U.S. investors to participate in cross-border tender offers and other business combinations. The amendments codify existing interpretive positions and exemptive orders and allow specified foreign institutions to report beneficial ownership on Schedule 13G to the same extent as their U.S. institutional counterparts.

The revised rules include changes to the current look-through test for identifying beneficial owners when determining eligibility to rely on the cross-border exemptions; changes to the Tier I and Tier II cross-border exemptions and the elimination of the 20 U.S. business day limit on the maximum length of a subsequent offering period for U.S. and cross-border tender offers.

The SEC will post the full text of the adopting releases as soon as possible, and Compliance Week will then add the documents to its searchable database of rules and standards.

Related Video: Watch Christopher Cox Speak on FPI (Aug. 27, 2008)
Related Resource: Additional SEC Staff Comments on FPI Proposals Aug. 27, 2008)
Related Coverage: FPIs Balk at New Filing Deadlines (May 20, 2008)
Related Coverage: SEC to Overhaul Foreign Issuers (Feb. 20, 2008)
Related Coverage: FPIs Mostly Favor Rule 12(g) Fixes (April 29, 2008)