TheCorporateCounsel.net

As nicely laid out in this CFO.com article, restatements reached a new high last year – not too surprising given option backdating, etc. In our “Restatements” Practice Area, we have posted copies of several recent studies.

Here is an excerpt from the CFO.com article: “Companies with U.S.-listed securities filed 1,538 financial restatements in 2006, up 13 percent from what had been a record number in 2005, according to an annual study by Glass, Lewis. Out of that total, 118 restatements were made by foreign issuers.

All told, the number of companies that restated last year—1,244 U.S. companies and 112 foreign companies—filed 1,538 financial restatements to correct errors represent 9.8 percent of all U.S. public companies. In 2005, only one in 12 companies restated their financial results. More interesting, in 2006, there was a 14 percent decrease in the number of restatements from companies that were mandated to comply with Section 404 of the Sarbanes-Oxley Act, “a sign that larger companies are making progress on cleaning up their books,” the proxy research firm asserted. However, restatements rose a whopping 40 percent among companies that haven’t yet been required to comply with Sarbox 404—smaller companies.”

Not that it matters, a different study noted in this WSJ article found even greater numbers of restatements last year…

US and EU Will Accept Global Financial Reporting Rules

At Wednesday’s Roundtable on International Financial Reporting Standards, SEC Chairman Cox announced that he and EU Internal Markets Commissioner Charlie McCreevy have struck an agreement that would eliminate the reconciliation to U.S. GAAP by 2009. In other words, US and European regulators pledged to recognize each other’s rules by 2009 for how companies report financial data, a move that may facilitate more international investing and reducing corporate compliance costs. Here is a related Washington Post article – and here are FEI’s notes on the Roundtable.

This development was a long time in the making, here is a timeline:

– 1996 – Congress passes the “National Capital Markets Efficiency Act, which directs the SEC to respond to the growing internationalization of securities markets by giving “vigorous support” to the development of “high-quality international accounting standards as soon as practicable.”

– 2000 – SEC issues a Concept Release that solicits comment on whether we should consider accepting International Financial Reporting Standards in the US.

– 2002 – FASB and IASB began in earnest to achieve short-term convergence between their respective sets of accounting standards after signing the “Norwalk Agreement.”

– 2002 – European Parliament and the Council of the European Union determine that all listed European Union companies have to prepare their consolidated financial reporting using IFRS, beginning in 2005.

– 2005 – SEC lays out International Financial Reporting Standards “Roadmap.”

Proposed Tweaks to FASB’s FIN 48

Last week, the FASB proposed guidance for FIN 48, the new standard that requires companies to state the value and risks of uncertain tax positions more clearly. Proposed FSP FIN 48-a provides guidance regarding when a position is “settled” and thus no longer is in need of a FIN 48 review. Comments are due by March 28th.