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Thanks to Kimberley Drexler, we have posted our notes from the MD&A workshop panel at SEC Speaks.

SAB 105 and Treatment of Derivatives

Last week, the SEC issued Staff Accounting Bulletin No. 105 – SAB 105 – which summarizes the views of the staff regarding the application of generally accepted accounting principles to loan commitments accounted for as derivative instruments.

Regarding when to implement SAB 105, the SAB states that the staff will not object if companies that have not already been applying SAB 105 accounting continue to account for loan commitments as derivatives as they have in the past for those commitments entered into on – or before – March 31, 2004. However, for any loan commitments entered into subsequent to that date, the staff expects all companies to apply SAB 105 to them.

SEC Proposes International Accounting Standards for Foreign Private Issuers

On Thursday, the SEC proposed amendments to Form 20-F that would allow foreign private issuers to change their basis of accounting to international accounting standards. These standards are known as International Financial Reporting Standards or “IFRS”. The SEC already has posted the proposing release.

With its proposal, the SEC seeks to ease the burdens that foreign private issuers may face when they adopt IFRS for the first time, while still improving the quality of financial disclosure they provide to investors. It is noteworthy that companies located in the European Union are required to adopt IFRS in 2005.

Today, Form 20-F requires foreign private issuers to include 3 years of audited financial statements. The proposal would allow these companies- for their first year of reporting under IFRS – to include only 2 years of audited financial statements in their SEC filings and require any company that adopts IFRS for the first time to provide disclosure related to exceptions from IFRS on which it relied, including a reconciliation from its prior methods of accounting. The new regulations would apply to companies that publish IFRS financial statements for the first time for any fiscal year beginning no later than January 1, 2007. There is a 30-day comment period.