March 11, 2005

And Even More on Lease Accounting!

I’ve heard that the Big 4 may be split on the issue of whether restatements caused by lease accounting are an indication of a material weakness, with two firms saying that they were going to look at this on a case by case basis applying a SAB 99 type materiality analysis to the impact of the restatement on the periods restated (apparently taking the view that while it would be material if taken all in one period, it was not material to any restated period and therefore not a material weakness) and the other two firms seem like they are inclined to take the view that essentially any lease accounting restatement results in a determination of a material weakness.

Here are two companies that just filed their 10-Ks with lease accounting restatements and clean 404 opinions: Office Depot and J Jill.

The restaurant industry is one of the industries impacted by issues raised in the SEC Chief Accountant’s letter on lease accounting (see my “SEC Speaks” notes regarding how OCA views its letter), as reflected by a recent letter from the National Restaurant Association to the SEC that I have heard about through the grapevine.

To see what two restaurant companies recently disclosed about their internal controls in their 10-Ks, see the two new additions to our “Internal Controls – Deficiencies and Weaknesses Identified” page.

Exhibits to 10-K Regarding Executive Compensation

I have been getting quite a few questions on what to do about exhibits to the 10-K relating to compensation events/data – such as director compensation, setting of NEOs salary (both for those NEOs with and without employment agreements), bonus related items, etc. So I have pulled some examples from 10-Ks filed recently and put them in a new “Form 10-K Disclosure” Practice Area on

’33 Act Reform

At last week’s “SEC Speaks,” the Staff indicated that the vast majority of the comments received on the ’33 Act reform were supportive. Here are the comment letters, including the one from the ABA submitted last week. The biggest areas of comment fall into three categories: (1) liabilities; (2) electronic road shows; and (3) disclosure of outstanding comments in ’34 Act reports.

Learn more about the reform in this interview with Valerie Ford Jacob on Securities Act Reform.