New Details Given On SEC Proposals
Big Plans For Small Cos.; Questions On IFRS
Porter
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The SEC is proposing to streamline the disclosure and reporting requirements of smaller companies, a move that has “the potential to save money for a wide range of companies as they comply with reduced disclosure burdens,” says Scott Porter of Orrick Herrington & Sutcliffe. Among other items, the proposed rule amendments would combine for most purposes “small business issuers” and “non-accelerated filers” into a single category of “smaller reporting companies.” Details are inside; more on the SEC’s International Financial Reporting Standards proposal is below.
SEC Questions On IFRS Reconciliation Plan
The SEC is seeking feedback on part of its IFRS plan, which would eliminate the requirement that foreign private issuers reconcile financial statements using International Financial Reporting Standards with U.S. GAAP. However, the Commission has not yet
explained how it might give U.S. companies the option of using IFRS—a “concept release” on the topic is expected shortly. Without that information, says Dennis Beresford, former chairman of the Financial Accounting Standards Board, “It will be hard for U.S. companies to fairly evaluate this proposal until they see what the SEC has in mind for them.” More on the IFRS proposal is inside.
Waiting For Lawmakers’ Next Move On 404
Turner
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The surprise move in Washington, D.C., to delay small companies’ compliance with Section 404 of Sarbanes-Oxley for another year has the financial reporting community on edge. While the SEC is still firmly committed to compliance starting in December, the House of Representatives has approved an extension, and powerful forces in the Senate also seem to be leaning that way. The bill now goes to the Senate Banking Committee, and “I think it is up in the air as to what happens in the Senate,” says former SEC chief accountant Lynn Turner. If allowed to proceed, Turner says, the delay has “at least a 50-50 chance of passing.”
The Messy Art Of Cash Flow Statements
Angell
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Once upon a time, the statement of cash flows was a fairly straightforward financial report noting the inflows and outflows of a company’s cash. Those days are over. Now the SEC often prods companies to improve their reporting of cash flow, and deciding correct classifications for those numbers is always a challenge. “There are few rules on the application of the cash flow statement,” says Richard Angell of the consulting firm CBIZ. “It’s a more principles-based standard, requiring more judgment.” Inside is a review of the latest thinking on cash flow statements, errors to avoid, and best practices to adopt.
Despite Investor Dislike, SERPs Keep Coming
Connell
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Compliance Week continues its series on executive perks this week with a look at Supplemental Executive Retirement Plans—lightning rods of investor ire that companies still award in large numbers. Compensation experts attribute SERPs’ popularity to limits on regular pension plans, which cap executives’ retirement pay at a fraction of modern CEO salaries. Compensation consultant Jack Dolmat-Connell describes SERPs as “really an addition to a normal pension plan, to allow the executive to accumulate enough retirement dollars to replace a certain percentage of their income.” Details and a downloadable spreadsheet of perks offered at 250 large companies is also inside.
Top Option Grants, Stock Awards In June
The largest stock option grant and the largest restricted stock award in June went to JPMorgan Chase EVP Gordon Smith, who joined the firm June 18 from American Express. On that day, Gordon received 1 million options (stock appreciation rights) with a face value of more than $50 million; he was also awarded almost 200,000 restricted stock units with a face value of $10 million, based on the award date stock price of $50.43. Several other companies also granted equity awards in June that merited inclusion in our “Top 10” list in both the option and stock award categories are General Mills, Electronic Arts, Computer Sciences Corp., and Carlisle Companies. Details and a downloadable spreadsheet are inside.
The Investor Activist Who Took Down Yahoo
Jackson
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Meet Eric Jackson, Corporate America’s newest gadfly. With little more than an Internet connection and a few shares of Yahoo stock, Jackson began a campaign this spring to oust CEO Terry Semel—and succeeded. We caught up with Jackson recently to discuss his tactics (blogs, YouTube videos, e-mail blasts, and the like) and how companies should handle solitary activists exploiting the Internet to magnify their strength (“They need to examine the merits of the ideas that the shareholders are advocating”). Next up, Jackson says, is the underperforming Motorola. A brave new world of shareholder activism is arising; details inside.
Stock Option Comments; COSO Guidance
Dicker
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The SEC has proposed amendments to its rules for registering stock options in an effort to reduce the filing burden for private issuers that want to offer employee stock options. Howard Dicker of the law firm Weil, Gotshal & Manges notes that the proposed exemption would save companies the expense of seeking individual no-action letters from the SEC. Also in The Filing Cabinet this week, the chairman of COSO promises new guidance soon to help companies better manage and monitor their systems of internal control over financial reporting. Details are inside.
Loyalty Accounting; PCAOB Reports; More
Pounder
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International accounting standard setters are crafting rules for customer loyalty programs that, so far, are largely ignored by U.S. Generally Accepted Accounting Principles. IFRIC 13, Customer Loyalty Programs, plugs a notable hole in the literature, experts say. “GAAP has offered little specific, authoritative guidance on accounting for the many kinds of CLPs that businesses offer today,” says Bruce Pounder of the accounting education firm Leveraged Logic. Also in the Accounting Industry Update this week: The PCAOB provides an update on its inspections of audit firms, and new research shows a drop in financial restatements.
Proxy Industry: What You Know Is Obsolete
Remember when the proxy advisory business consisted of Institutional Shareholder Services and Glass, Lewis & Co.? Both firms are now under new management—with some controversy included—and a new crop of advisory firms are emerging. This week, Compliance Week columnists and resident institutional experts Stephen Davis and Jon Lukomnik—founder of the International Corporate Governance Network and former New York City deputy comptroller, respectively—track the latest industry developments, and speculate on the future of this important and rapidly changing corner of corporate governance.
Who’s Coming And Going In Governance
McDevitt
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Turnover in the ranks of corporate governance executives continues this week, as Bronco Industries, TECO Energy, and Guardian industries all shuffled their accounting or legal teams. At the $3.4 billion TECO, Sheila McDevitt retired as general counsel and was replaced by the former deputy general counsel Charles Attal, who had joined the firm six days after the 9/11 attacks. David Schwartz, the former assistant general counsel and corporate secretary at TECO, was simultaneously promoted to vice president of governance and compliance, associate general counsel, and corporate secretary. More news of hirings, firings, customer wins, and other governance gossip is inside.
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New Details Given On SEC Proposals
July 19: IFRS Webcast With PwC’s David Schmid
Spreadsheet Of The Top Equity Awards In June 2007
