Securities and Exchange Commission (SEC) Updates

IMA Committees' Response to SEC Roadmap for IFRS use by U.S. Companies

IMA’s Financial Reporting and Small Business Committees submitted comment letters to the Securities and Exchange Commission (SEC) in response to its proposed roadmap for the use of International Financial Reporting Standards (IFRS) by U.S. Companies. Comment letters were due on April 20, 2009.

On November 14, 2008, the Securities and Exchange Commission (SEC) issued the highly anticipated roadmap for use of International Financial Reporting Standards (IFRS) by U.S. companies. Senior management of IMA issued a position statement about the roadmap on September 23, 2008. Click here to read more.

Based on comments the SEC will receive from constituents regarding the proposed roadmap once it is filed in the Federal Register, the SEC may make a decision in 2011 on whether the adoption of IFRS would be of best interest to the public and would benefit investors of U.S. companies. The proposed roadmap sets out milestones that if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the SEC. Some of the milestones include: 1.) Improvements in accounting standards; 2.) Improvement in the ability to use interactive data (XBRL) for IFRS reporting; and 3.) Potential implementation of mandatory use of IFRS, including consideration of any mandatory use to be phased in among groups of companies based on their market capitalization.

A copy of the SEC’s proposed roadmap for IFRS can be found below under IMA comment letters and related documents. IMA’s Financial Reporting Committee (FRC) has expressed its views on previous proposals issued by the SEC about IFRS. The Committee submitted a letter to the SEC in November 2007 about use of IFRS by U.S. companies. A copy of the letter can be found on IMA’s website in the Professional Advocacy section, under Financial Reporting Committee Position Letters.

IMA’s Financial Reporting Committee (FRC) submitted its letter to the SEC on the IFRS roadmap proposal on March 26, 2009. The challenge presented to the SEC by the FRC in their letter is to determine how two sets of standards can be in a position to be converged before conversion takes place. The FRC also suggests in the letter that specific milestones be identified with early adoption by U.S. companies to use IFRS. A copy of the letter issued by the FRC can be found on IMA’s website in the Professional Advocacy section, under Financial Reporting Committee Position Letters.

IMA’s Small Business Committee (SBC) submitted its letter to the SEC on the IFRS roadmap proposal on April 20, 2009. The SBC noted in its comment letter that in addition to the SEC and its registrants, there are many other organizations and individuals involved in the global financial reporting supply chain (preparers, auditors, investors, other regulators, standard-setters, etc.). Consequently, the SBC advocates the development of a multilateral roadmap for coordinated action among the preparer, auditor, academic, regulator, and investor communities, in both the public company and private company realms, instead of the SEC’s proposed Roadmap for unilateral action. Additionally, the SBC observed that further convergence of U.S. GAAP and IFRS at the standard level is necessary to minimize the costs and disruptions associated with a journey toward the adoption of global standards by U.S. companies. A copy of the letter issued by the SBC can be found on IMA’s website in the Professional Advocacy section, under Small Business Financial and Regulatory Affairs Committee.

SEC SOX Survey
The SEC announced has extended from January 16 to January 31 the deadline for public companies to participate in a voluntary Web-based survey about the costs and benefits of Sarbanes-Oxley Act (SOX) Section 404. The Chamber strongly urges companies to participate in this survey. Participation allows small businesses an opportunity to provide input to the SEC on the impacts of SOX.

SOX Section 404 requires companies to conduct independent audits and internal management assessments of their internal controls over financial reporting (ICFR).

The cost-benefit study was announced by the SEC in February 2008 to assess the effect of previous measures taken by itself and the Public Company Accounting Oversight Board (PCAOB). In connection with the study, the SEC proposed a one-year extension of Section 404's auditor attestation requirement for smaller companies, which it later approved in June.

The survey is open to any company with Section 404 compliance experience in the United States or globally.

Results from the survey will inform its ongoing cost-benefit study of Section 404 implementation. The cost-benefit study has a special focus on the consequences for smaller companies, who are scheduled to begin complying with Section 404's independent audit requirements at the end of the year. It has been reported that more than 2,000 companies already have completed the survey.

Information about the SEC’s Section 404 survey project is available at www.sec.gov/spotlight/404survey.htm.

Please contact Tom Quaadman at (202) 463-5540 or tquaadman@uschamber.com with any questions.

SEC Approves Interactive Data for Financial Reporting by Public Companies and Mutual Funds
On December 18, 2008, the Securities and Exchange Commission (SEC) voted to require public companies and mutual funds to use interactive data for reporting financial information. This decision may be good news to investors, as use of interactive data can increase the speed, accuracy and usability of financial disclosure, potentially maximizing shareholder value.

Under the SEC’s mandate, public companies will be required to submit financial reports using interactive data according to a phased-in schedule beginning in 2010. The largest companies who file using U.S. GAAP with a public float above $5 billion will be required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15, 2009. This requirement will apply to approximately 500 companies. The remaining companies who file using U.S. GAAP will be required to file with interactive data on a phased-in schedule over the next two years. Companies reporting in IFRS issued by the International Accounting Standards Board will be required to provide their interactive data reports starting with fiscal years ending on or after June 15, 2011.

The SEC unveiled its new financial reporting system in 2008, IDEA (Interactive Data Electronic Applications), to accept interactive data filings and give investors faster and easier access to key financial information about public companies and mutual funds. The new IDEA system is supplementing, and will eventually replace, the agency’s 1980s-era EDGAR database, marking the SEC’s transition from collecting forms and documents to making financial information itself freely available to investors.

Investors can begin seeing this new information at http://idea.sec.gov. Investors can view voluntary interactive data submissions, for companies participating in the SEC’s Voluntary Filer Program. Companies’ financial information will be immediately available to investors through the SEC’s IDEA system as well as on the web sites of companies and funds disclosing the data as soon as companies and funds release their mandatory interactive data submissions.

IMA Member Bob Laux Participates at SEC IFRS Roundtable Event
IMA^® member Bob Laux, with experience serving on IMA’s Board of Directors and the Financial Reporting Committee, participated at an SEC roundtable panel on August 4 in Washington, D.C. The roundtable, organized as two panels, explored the performance of International Financial Reporting Standards (IFRS) relative to U.S. Generally Accepted Accounting Principles (U.S. GAAP) during the recent period of market turmoil.

The two panels, Financial Reporting in the Financial Services Industry, and Financial Reporting in Other Industries, tapped into participants’ experience in accounting for off-balance sheet arrangements under both IFRS and U.S. GAAP, identified challenges faced in applying fair value accounting standards under both IFRS and US GAAP, and considered inventory as it relates to the pricing of commodities and revenue recognition. Mr. Laux, who works as senior director, financial accounting and reporting at Microsoft Corporation, participated on the latter panel, joining other experienced IFRS experts.

Overall, panelists were confident that IFRS has performed well so far, but still is a relatively new set of standards that would benefit from more application guidance to improve consistency. Panelists agreed that there is a growing demand for a single set of standards, which should be IFRS. While the SEC did not indicate that all U.S. issuers adopt IFRS, it appears to be more of a matter of time.

An archive of the SEC’s August 4 roundtable event is available for download on the SEC’s website at www.connectlive.com/events/secroundtable080408.

SEC Proposes XBRL Phase-in for Large Public Companies by December; Smaller Companies to Follow
The Securities and Exchange Commission (SEC) held an open meeting on May 14, 2008, voting to release for public comment a proposed rule requiring public companies to file certain data using XBRL data tags in XBRL (eXtensible Business Reporting Language). The proposed rule was issued on May 30, 2008.

The SEC’s proposal calls for a phase-in approach, with the largest 500 U.S. companies -- specifically, those that file under U.S. Generally Accepted Accounting Principles (GAAP) and have a worldwide public float of over $5 billion -- to be required to use XBRL in financial statements for fiscal periods ending on or after December 15, 2008. In that first year, the SEC would permit footnotes to be included in blocked tags. Thereafter, the detail within each footnote would have to be individually tagged.

Smaller U.S. companies and companies filing under International Financial Reporting Standards (IFRS) would be phased in during the following two years. The SEC noted that it will monitor initial adoption by the largest companies to determine if any change to the remaining phase-in schedule is necessary for the smaller companies and foreign filers.

Under the proposal, the filing deadline for XBRL data would remain the same as that of current SEC filings. This includes annual, interim, and transition reports along with registration statements. However, an additional 30-day grace period would be provided for the initial filing of XBRL financial statements, and a similar grace period would be provided for the initial filing of the detailed footnotes required in the second year.

During the meeting on May 14, SEC staff spoke of filing certain XBRL information in to SEC filings, and certain XBRL information would also have to be provided on corporate websites as suggested in the proposed rule. Comment letters for the proposed rule are due for submission to the SEC by August 1. A copy of the proposed rule can be found below under IMA Comment Letters and Related Documents.

SEC’s Sarbanes-Oxley (SOX) Section 404 guide for Small Businesses
The SEC recently developed a brochure as a follow up to guidance issued by the Commission in June 2007 to help small businesses assess their internal controls over financial reporting in order to be in compliance with SOX Section 404 implementation. The 2007 annual report for companies will be the first year that the management assessment of internal controls over financial reporting will need to be included. In addition to management assessments, Section 404 of SOX also requires an auditor’s attestation of a company’s internal controls over financial reporting. However, the requirement of an auditor’s attestation won’t apply to most small businesses until the filing of their 2008 annual reports. An electronic version of the brochure can be found below under IMA Comment Letters and Related Documents. Additional information about SOX Section 404 implementation can be found on the SEC’s website at www.sec.gov/spotlight/soxcomp.htm.On December 12, 2007, IMA issued a press release stating its support of SEC’s proposal to postpone SOX implementation for small businesses. Click here to view a copy of the press release.

IMA Speaks Out at Standard Setting Subcommittee Briefing
Paul Sharman, President and CEO of IMA discussed his concerns about complexity with financial reporting issues at a briefing conducted by the Standard Setting Subcommittee of the SEC’s Advisory Committee on Improvements to Financial Reporting at the SEC headquarters on December 6, 2007. Jeff Thomson, IMA’s VP of Research and Applications Development and Allan Cohen, VP and Assistant Controller of Time Warner Inc., and a member of IMA’s Financial Reporting Committee (FRC) were also in attendance. Paul expressed at the briefing that IMA fully supports the subcommittee’s efforts to determine the impact that complexity in accounting standards and standard-setting processes have on the quality of financial information and ways to deal with it. Paul informed attendees at the meeting that IMA’s big concern is that the U.S. emphasis in its standards and regulations is on inspection and compliance, rather than facilitating practical implementation of principles using a “build quality in” mentality. References were made during Paul’s discussion to the FRC letter that was submitted as a response of issues addressed in a discussion paper prepared by the SEC’s Advisory Committee on Improvements to Financial Reporting. A copy of FRC’s comment letters can be found on IMA’s website under the Professional Advocacy section/Financial Reporting Committee Position Letters. A copy of Paul Sharman’s statement that was presented to the Standard Setting Subcommittee of the SEC’s Advisory Committee on Improvements to Financial Reporting can be found below under IMA Comment Letters and Related Documents.

SEC’s position on foreign private issuers’ use of International Accounting Rules
On April 24, 2007, the SEC announced plans to issue a proposing release this summer that will request comments on foreign private issuers’ use of International Accounting Rules. The proposal would suggest giving companies a choice between the application of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) in financial reporting preparation. The Commission’s rules currently require that companies that apply IFRS towards their financial statements or any other non-U.S. GAAP, provide a reconciliation of those financial statements to U.S. GAAP. The Commission’s planned proposal this summer would address eliminating that reconciliation requirement with respect to financial statements filed in IFRS beginning in 2009. See a copy of the press release announcing the proposal below under IMA Comment Letters and Related Documents. The Financial Reporting Committee of IMA submitted a comment letter to the SEC to express its views on the issues addressed in the proposed release. A copy of the letter can be found on the Financial Reporting Committee section of this site.

On November 15, 2007, the SEC voted unanimously to drop the IFRS reconciliation requirement, effective immediately after it was jointly recommended by the Division of Corporation Finance and the Office of Chief Accountant.

John White, Director of the Division of Corporation Finance, noting the comment period on the proposed rule ended just two months ago, told the Commission, “the staff has worked incredibly hard to bring this recommendation to you so it can be applicable to financial years ending after today (i.e. ending in 2007).”

The SEC staff recommended:

• That the Commission only accept IFRS by foreign private issuers without reconciliation if the issuer company asserts, and the auditor opines, compliance with IFRS ‘As Issued By IASB.”
• Offering an “Optional, temporary provision, for any foreign private issuer currently applying the European Union ‘carve-out’ for IAS 39 on derivatives. This would be a two year transition period to allow such issuers to reconcile their financial statements (prepared using the European Union carve-out) to IFRS as issued by the IASB. The temporary provision would apply for the first two financial years after Nov. 15, 2007; subsequently, those issuers would have to report in the same manner as any other foreign private issuer (i.e., by using IFRS as issued by the IASB, without any local or jurisdictional carve-out.

On November 7, 2007, the Financial Accounting Standards Board (FASB) and its oversight foundation, the FAF, sent a letter to the Securities and Exchange Commission asking for a delay in the agreement to allow foreign firms using IFRS to no longer reconcile their accounts to U.S. GAAP rules. Although the FASB supports the concept of globalization of standards, the board feels that the removal of the requirement that foreign private issuers reconcile their reported results to U.S. GAAP is a difficult and sensitive issue that could have important implications for the continued development of a truly international financial reporting system.

SEC Approval of PCAOB’s AS5 Standard
On July 25, 2007, the Public Company Accounting Oversight Board’s (PCAOB) Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements, was approved by the Securities and Exchange Commission (SEC). It replaces the PCAOB’s previous internal control auditing standard, AS2. Registered audit firms will be required to use the new standard for all audits of internal control no later than the fiscal years ending on or after November 15, 2007. Senior management of IMA has expressed concerns to the SEC and PCAOB about AS5 being the “de facto” guidance for management accountants to be in compliance with Section 404 of the Sarbanes-Oxley Act. IMA will continue to be an advocate for providing guidance that is considered scalable for small businesses. A copy of the AS5 Standard can be found on IMA’s website under the Professional Advocacy Section/Public Company Accounting Oversight Board.

SEC Financial Reporting Advisory Committee
On June 27, 2007, SEC Chairman Christopher Cox announced the Commission’s plans to develop and advisory committee that will examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors. Robert C. Pozen, chairman of MFS Investment Management in Boston and former vice chairman of Fidelity Investments, will chair the SEC’s advisory committee. Chairman Cox said he expects between 13 and 17 additional members with varied backgrounds to be named to the advisory committee within the next few weeks. IMA’s Financial Reporting group has developed a working group to address issues related to complexity with financial reporting. The working group plans to monitor activity of the SEC Financial Reporting Advisory Committee once it is fully developed. Denny Beresford, member of IMA’s Financial Reporting Committee, has been appointed to serve on the SEC Committee. A copy of SEC’s press releases about the advisory committee can be found below under IMA Comment Letters and Related Documents.The Advisory Committee is soliciting public comment on a discussion paper prepared by the Committee Chairman, Robert Pozen. The discussion paper provides a working outline, including a discussion of views and potential consideration points that the Committee may evaluate. See a copy of the discussion paper below under IMA Comment Letters and Related Documents.The Financial Reporting Committee of IMA submitted a letter to the SEC for their views on topics included in the SEC Financial Reporting Committee’s discussion paper to be considered. A copy of the letter can be found on the Financial Reporting Committee section of this site.

On January 11, 2008, the SEC’s Advisory Committee on Improvements to Financial Reporting (CIFR) presented to the commission, preliminary recommendations that would serve as resolutions towards complexity in financial reporting. The recommendations were based on feedback CIFR received from its four subcommittees: 1) Substantive Complexity; 2) Standard – Setting Process; 3) Audit Process and Compliance and 4) Delivering Financial Information. The commission voted approval for resolutions presented to them by CIFR. A copy of the recommendations can be found below under IMA Comment Letters and Related Documents.

SEC Issues Interpretative SOX 404 Guidance
On June 21, 2007, the SEC issued its much anticipated interpretative SOX 404 guidance. Senior management of IMA issued a letter to the U.S. Congress stating their concerns with the guidance. The letter refers to concerns about the impact the guidance will have on smaller companies based on the expectation that such companies would be expected to implement SOX 404 immediately. A suggestion is made by IMA senior management in the letter that a delay of at least one year should be granted for smaller public companies. This delay can result in an implementation of more radical changes, together with a rigorous SEC led cost-benefit analysis and plan to measure success in order to “get it right” for investors, businesses of all sizes, and U.S. global competitiveness. A copy of the letter to Congress and the interpretative guidance can be found below under IMA Comment Letters and Related Documents.

SEC May 23 and PCAOB May 24 meetings – Sarbanes-Oxley 404 implementation guidance
The Securities and Exchange Commission (SEC) conducted an open commission meeting on May 23, 2007, to propose issuance of final interpretative guidance for management to provide its assessment and report on internal control over financial reporting under Sarbanes-Oxley (SOX) 404. A unanimous vote was made by the Commissioners to issue the guidance. As indicated in an open meeting on April 4, 2007, the final guidance was revised from the initial proposal to be in alignment with the Public Company Oversight Board’s (PCAOB) revised AS2 standard. The related final rulemaking includes removing the second audit opinion on management’s assessment, and retaining just one audit opinion under 404 directly on internal control. Further a rule will state that management assessment conducted in accordance with SEC’s interpretative guidance will satisfy the SEC’s rule that required management report under SOX 404. Additionally, a new rule will include the definition of material weakness directly in SEC rules rather than by reference to auditing literature. SEC staff indicated that their definition of material weakness is in line with the PCAOB’s proposed final guidance. SEC’s final guidance on SOX 404 implementation is expected to be released shortly within a few days. See a copy of the press release announcing issuance of SEC’s final guidance below under IMA Comment Letters and Related Documents. A unanimous vote was made among PCAOB members during an open meeting on May 24 to submit the final revised standard to the SEC for approval. See a copy of the final standard issued by PCAOB under Professional Advocacy/PCAOB/IMA Comment Letters and Related Documents.

On February 13, 2007, IMA issued a comment letter to the SEC and PCAOB to address concerns about proposed guidance on SOX 404 implementation. Specifically there were five specific areas of concern that were described in the letter; 1) Guidance should be issued by one regulatory body. Guidance from PCAOB will still be the de facto standard unless major revisions are implemented; 2) Proposals were not risk-based by global risk management standards; 3) Current “quality bar” of zero material defects in draft financial statements is expensive without significantly increasing investor protection; 4) Proposal guidance support retention of the auditor’s subjection opinion on the effectiveness of internal controls over financial reporting; and 5) Proposals were not practical for smaller public companies. The other four issues listed above disproportionately impact smaller public companies.

IMA, as part of their webinar series, will present a webinar on June 6, 2007 entitled, “SOX 404 Breaking News: Are We There Yet?” At this live webinar, IMA has assembled a panel of thought leaders who will give an assessment of the new guidance from a management and investor perspective, with an emphasis on what the rules mean for companies of all sizes, including non-accelerated filers, while providing practical solutions on the path forward. The webcast will provide commentary on the five specific areas described above that was addressed in IMA’s comment letter to the SEC and PCAOB about their December 2006 proposed guidance on SOX 404 implementation.

SEC’s position on U.S. companies’ use of International Accounting Rules
On April 24, 2007, the SEC announced plans to issue a proposing release this summer that will request comments on foreign private issuers’ use of International Accounting Rules. The proposal would suggest giving companies a choice between the application of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) in financial reporting preparation. The Commission’s rules currently require that companies that apply IFRS towards their financial statements or any other non-U.S. GAAP, provide a reconciliation of those financial statements to U.S. GAAP. The Commission’s planned proposal this summer would address eliminating that reconciliation requirement with respect to financial statements filed in IFRS beginning in 2009. See a copy of the press release announcing the proposal below under IMA Comment Letters and Related Documents.The Financial Reporting Committee of IMA submitted a comment letter to the SEC to express its views on the issues addressed in the proposed release. A copy of the letter can be found on the Financial Reporting Committee section of this site.

SEC SOX 404 Open Meeting – April 4, 2007
The Securities and Exchange Commission (SEC) had an open commission meeting on April 4, 2007. The Commission’s proposal for additional guidance for Sarbanes-Oxley 404 was discussed during the course of the meeting. Specifically, discussions took place about alignment of the Commission’s guidance with the Public Company Accounting Oversight Board’s revised AS2 standard, informally known as AS5. The SEC has preliminary plans to issue final guidance by May, 2007. See a copy of IMA’s press release about the meeting. An archived webcast file of the meeting can be found at www.sec.gov.

SEC appointment of new Deputy Chief Accountant
On February 5, 2007, the SEC announced its appointment of James L. Kroeker as Deputy Chief Accountant for the Commission’s Office of the Chief Accountant. Mr. Kroeker will be responsible for resolution of accounting issues, rulemaking projects, and oversight of private sector accounting standard-setting efforts. Mr. Kroeker’s was a partner at Deloitte and Touche from June 2002 to February 2007 and a Practice Fellow at the Financial Accounting Standards Board (FASB) from August 1999 to June 2001. See a copy of the press release about Mr. Kroeker’s appointment below under IMA Comment Letters and Related Documents.

SEC Dec. 13 meeting - Sarbanes-Oxley 404 implementation guidance
The Securities and Exchange Commission (SEC) conducted an open commission meeting on December 13, 2006 to provide updates to constituents on their progress with plans outlined in their May 17, 2006 press release to develop proposed guidance for management relating to the internal control reporting requirements under Section 404 of the Sarbanes-Oxley Act. Specifically, a proposal was presented from the SEC’s Office of the Chief Accountant and Division of Corporation Finance to issue interpretative guidance that will allow for companies of all sizes to make an assessment on internal controls over financial reporting in a highly efficient and tailored manner. Based on details shared during the announcement, it appears in general that the guidance will be in line with IMA’s vision for companies to have access to guidance that promotes a “top-down, risked based approach”. Comments from constituents are due for submission by February 26, 2007. A copy of IMA’s comment letter submitted to the SEC and the Public Company Accounting Oversight Board (PCAOB) can also be found below under related documents.

SEC’s interactive data developments
The SEC announced on Sept. 25 that it is taking a giant leap into the 21st century by transforming its EDGAR system into a real-time search tool with interactive capabilities. The SEC is awarding $54 million to three technology companies to help transform the 1980s-vintage, form-based system into a more dynamic one that can provide transparency into current financials and insight into developing trends. The investment represents a natural extension of the agency’s earlier commitment to move its filings into an XBRL format.

“Today’s announcement demonstrates the Commission’s firm commitment to interactive data,” said SEC Chairman Christopher Cox. “The new system will make it easier both to file information and to use it.” The SEC chairman also promised that EDGAR users would see a welcome change in the form of lower prices.

The SEC awarded $5.5 million to XBRL-US Inc. to complete the code writing of the XBRL labels for U.S. GAAP financial statements. This funding would help with taxonomies. While the basic “taxonomies” or computer labels, for many of the industries have been completed, the work of “tagging” the financial report information with a computer code so that users can search for and find the data remains unfinished.The Financial Accounting Foundation (FAF) has developed a Taxonomy Advisory Council to oversee taxonomy developments. More information about FAF’s involvement with taxonomy development can be found on IMA’s website under the Professional Advocacy Section/FAF.

Staff Accounting Bulletin (SAB) No. 108
The SEC issued SAB No. 108 on September 13, 2006. The interpretations in the staff bulletin express the staff’s views regarding the process of quantifying financial statement misstatements. The interpretations were issued to address diversity in practice in quantifying financial statement misstatements and the potential under current practice for the build up of improper amounts on the balance sheet. A copy of the bulletin can be found below under related documents.

Executive Compensation Rules
The SEC issued new Executive Compensation Disclosures rules on September 8, 2006. The disclosures are intended to provide investors with a clearer and more complete picture of the compensation earned by a company’s principal executive officer, principal financial officer and highest paid executive officers and members of its board of directors. In addition, they are intended to provide better information about key financial relationships among companies and their executive officers, directors, significant shareholders and their respective immediate family members. The effective date of such disclosures is November 7, 2006. A copy of the Executive Compensation Disclosures rules can be found below under related documents.

Deferral of Sarbanes-Oxley section 404 reporting
The SEC proposed rules deferring 404 reporting for non-accelerated filers and newly public companies and also issued final rules deferring the auditor reporting under 404 for foreign private issuers that are accelerated filers but not large accelerated filers. The effective date of deferral for foreign private issuers is from September 14, 2006 to December 31, 2007. Copies of the proposed and final rules can be found below under related documents.

SEC appointment of new Chief Accountant
On July 24, 2006, Chairman Christopher Cox announced that Conrad Hewitt, a distinguished leader of the accounting profession and the former chief financial regulator for the State of California, will join the Securities and Exchange Commission as its next Chief Accountant.

"Conrad Hewitt brings to the SEC over 30 years' experience as a leader of one of the world's largest accounting firms, a strong background as a regulator, and recent service as chairman of 10 audit committees," Chairman Cox said. "His deep commitment to promoting and safeguarding the interests of investors and the efficient operation of our capital markets will make him an exceptionally valuable leader of our professional staff. Conrad's mission — to maintain the integrity and strength of our markets in an era of unprecedented global competition — is enormously important. His combination of public and private sector experience, his extensive knowledge, and his practiced judgment make him exceptionally qualified to meet this challenge, and to help me and the Commission address the whole range of domestic and international issues facing us. With his help, we will ensure that America's markets remain the gold standard. When Conrad joins the Commission, he will become America's chief accountant, and every investor will be his client."

Mr. Hewitt will begin his duties at the Commission on August 18, 2006. A copy of the press release announcing Mr. Hewitt’s appointment can be found below under related documents.

Kathleen Casey sworn in as 88th SEC Commissioner
Kathleen L. Casey was sworn in as 88th SEC Commissioner by Chairman Christopher Cox on July 17, 2006. Commissioner Casey was appointed by President George W. Bush to be a Commissioner of the Securities and Exchange Commission on May 18, 2006.

Chairman Cox said, “We are enormously fortunate to have Kathleen Casey joining us. As the Staff Director of the Senate Committee on Banking, Housing and Urban Affairs for the past three and a half years, Kathleen brings to us an invaluable wealth of experience. She is strongly committed to safeguarding the interests of investors, and to maintaining the health of the securities markets on which capital formation, and our nation’s economic health, depend.”

Prior to being appointed Commissioner, Ms. Casey spent 13 years on Capitol Hill. She served as Staff Director and Counsel of the Senate Banking, Housing, and Urban Affairs Committee. Ms. Casey was primarily responsible for guiding the Chairman’s and Committee’s consideration of, and action on, issues affecting economic and monetary policy, international trade and finance, banking, securities and insurance regulation, transit and housing policy, money laundering and terror finance.

Ms. Casey succeeds Cynthia Glassman, the 87th Commissioner. A copy of the press release announcing Ms. Casey’s appointment can be found below under related documents.

Advisory Committee on Smaller Public Companies
The SEC established the Advisory Committee on Smaller Public Companies to assess the current regulatory system for smaller companies under the securities laws, including the impact of the Sarbanes-Oxley Act of 2002. Senior level management of the Institute of Management Accountants (IMA) issued a comment letter to the SEC on April 3, 2006 that addressed issues in an exposure draft of the Advisory Committee's final report that was issued on April 23, 2006. IMA's comment letter addressed concerns of the Committee's suggestion that smaller companies be exempt from implementation of Section 404 of the Sarbanes-Oxley act. The concern raised by IMA management regarding such exemption is that it would create unfavorable bias towards the smaller companies that they will be seen as having unreliable financial statements in comparison to companies that comply with the requirements. A copy of the committee's final report can be found on the SEC website, www.sec.gov under the section of Advisory Committee on Smaller Public Companies. A copy of IMA's comment letter can be found below under related documents.

SEC and Public Company Accounting Oversight Board (PCAOB's) second annual roundtable discussion about Sarbanes-Oxley implementation
On May 10, 2006, the SEC and PCAOB conducted their second roundtable to encourage panelists to discuss their second year experience with Sarbanes-Oxley implementation specifically related to PCAOB Standard #2 (AS 2), "An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements". Linda Devonish- Mills, IMA's new Director of Professional Advocacy observed the web cast of the roundtable. Her observations were published in an edition of IMA's on-line newsletter. Publication of the observation can also be found in the Advocacy section of IMA's website under Event and Forum Reviews. Although panelists in general indicated that implementation of AS 2 was less complex, there were still major concerns expressed requesting more guidance to small companies for Sarbanes Oxley implementation. Pertinent information related to the roundtable can be found on the sec website under www.sec.gov/spotlight/soxcomp.htm.

Senior management of IMA submitted a comment letter to the SEC on May 4, 2006 in order for their concerns about Sarbanes Oxley implementation to be addressed at the roundtable. The letter referred to a research study commissioned by IMA and conducted by Dr. Parveen P. Gupta, a professor at Lehigh University during the first quarter of 2006. Results of the study confirmed the concern that there is not enough guidance for management to be in adherence to Sarbanes Oxley implementation. Instructions on how to purchase copies of the study can be found under the Centre of Excellence section of the IMA website. Proceed to click on Enterprise Risk & Controls and then to SOX Study. See a copy of the letter below under related documents.

Despite the filing of the letter on May 4, 2006, senior management of IMA felt that their views on Sarbanes Oxley implementation were misrepresented at the roundtable on May 10. A letter was written by senior management of IMA to Christopher Cox, SEC Chairman and John White, SEC Director of the Division of Corporate Finance, describing IMA's proposed solutions with developing practical management guidance for Sarbanes Oxley implementation. Specifically, the letter makes reference to IMA's plans for developing for public comment an assessment methodology that IMA believes is practical, scalable and risk-based, and enables organizations to achieve the value in compliance. See a copy of the letter below under IMA Comment Letters and related documents.

May 17, 2006 Press Release
The SEC issued a press release on May 17, 2006 which was viewed by constituents as their response to feedback received from the roundtable on May 10 about Sarbanes - Oxley implementation. The press release indicated that the SEC will issue a concept release to constituents to give views on topics related to Sarbanes-Oxley implementation that need more guidance. The concept release was issued on July 18, 2006. A copy of the release can be found below under related documents. The PCAOB also announced in the press release that amendments to AS 2, "An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements", will be made to provide more guidance to small companies. A copy of the press release can be found on the SEC website under News and Public Statements/Press Releases.

IMA Senior Management prepared a discussion paper for comment, documenting IMA's approach to management assessment guidance, which is practical, risk-based, scalable and cost-effective for organizations of all sizes. The discussion paper has been filed with the SEC to serve as a response to the concept release issued on July 18, 2006. The discussion paper will also be released on September 18, 2006 for public comment. See a copy of the letter and discussion paper below under IMA Comment Letters and Related Documents.

The Financial Reporting Committee (FRC) is a standing advisory committee for the Institute of Management Accountants (IMA). The committee is comprised of senior financial executives from companies of various sizes. The committee addresses IMA's views on technical issues. The committee submitted a letter to the SEC on September 15, 2006 as a response to issues addressed in its concept release on July 18, 2006. A copy of the comment letter can be found on IMA’s website under the Professional Advocacy Section/Financial Reporting Committee Position Letters.

XBRL Roundtables
The SEC conducted its first roundtable on XBRL on Monday, June 12, 2006. The morning session focused on improving the quality of mutual fund disclosures and discussed what types of information are most useful to mutual fund investors. The discussion took place on how the Commission can leverage the power of interactive data and other technology to provide mutual fund investors with better information. The afternoon session covered what investors and analysts are looking for in the new world of interactive data; how to accelerate the use of new software that permits the dissemination of interactive financial data' and what the SEC can do to help companies take maximum advantage of the potential of interactive data to improve disclosure.

Jeff Thomson, IMA's Vice President of Research and Applications Development, released a comment letter on Sunday, June 11, 2006, to address IMA's position with XBRL to be used as a point of reference at the roundtable on June 12. Although the letter states that IMA supports XBRL, concerns about taxonomy development were addressed. Specifically it is recommended in the letter that a new organizational governance and especially funding structure must be developed in order to accelerate taxonomy development. The letter also addresses the concern that inclusivity of XBRL development needs to be expanded to include the major influencers of enterprise business reporting inside the value chain (including management accountants), not just those involved in final report preparation and audit. Additionally, the FRC should be recognized as influencers to transform enterprise business reporting. The comment letter also indicates that tagging financial statements after their production is not where the value of XBRL lies. The value lies inside the value chain in tagging data at some reasonable level before it reaches the final chart of accounts. See copy of the comment letter below under IMA Comment Letters and related documents.

The SEC conducted its second roundtable on what is currently referred to as “interactive data” vs. XBRL on Tuesday, October 3, 2006. The opening address was given by Indra Nooyi, PepsiCo Inc.’s incoming CEO. PepsiCo is one of the public companies voluntarily testing the new financial reporting technology. The roundtable also focused on new software for interactive data. Presenters demonstrated the currently available software, and panelists discussed how interactive data can help investors.

The SEC conducted its third interactive data roundtable on March 19, 2007. Representatives from various companies discussed their experiences during 2006 with using the interactive data mechanism XBRL to file their external reports to the SEC. The panelists indicated that it is not necessary to have a background in information technology to be able to use XBRL efficiently. It was also advised by panelists to identify staff from a company’s accounting or external reporting group to serve as a liaison when dealing with software providers that support XBRL.

Pertinent information related to each of the roundtables can be found on the SEC website under www.sec.gov/spotlight/xbrl.htm.

IMA Comment Letters and Related Documents
IFRS Roadmap
SEC-XBRL Mandate Proposal
SEC Financial Reporting Advisory Committee Preliminary Recommendations – Complexity
SOX Section 404 guide for Small Business
IMA’s Position Statement at Standard Setting Subcommittee Briefing
SEC Concept Release on use of International Accounting Rules
SEC’s proposal on use of International Accounting Rules
SEC Financial Reporting Advisory Committee
SEC Financial Reporting Advisory Committee Appointments
SEC Financial Reporting Advisory Committee Discussion Paper
SEC interpretative SOX 404 guidance
IMA’s letter to U.S. Congress – SOX 404 guidance
SEC Final SOX 404 Guidance Press Release
Foreign Private Issuers’ Use of International Accounting Rules Press Release
SEC Deputy Chief Accountant Appointment Press Release
IMA Letter to SEC/PCAOB – SOX 404 guidance
Sarbanes-Oxley 404 implementation guidance
SEC SAB No. 108
SEC Executive Compensation Rules
SEC proposed rules of deferral of Sarbanes-Oxley 404 reporting
SEC final rules of deferral of Sarbanes-Oxley 404 reporting
IMA Comment Letter/Discussion Paper response to SEC Concept Release – July 18, 2006
SEC Concept Release on use of International Accounting Rules
SEC Chief Accountant Appointment Press Release
SEC Concept Release – July 18, 2006
SEC 88th Commissioner Appointment Press Release
IMA Letter to Chairman Cox
SEC-4-511 SOX Section 404 Letter
XBRL Comment Letter
IMA Comment Letter to SEC Small Business Advisory Committee