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What's New
PCAOB presses case for narrative in financial statements
After nine years, lessons from Sarbanes Oxley compliance
Small companies weigh in on IFRS move
The war on Dodd-Frank continues Editor's Corner: XBRL at the finish line: Was it worth the effort? Tip of the Week
Is an annual corporate responsibility report a good idea? Also Noted: IBM
Credit raters take closer look at governance; ISDA says swaps market is safer and much more... News From the Fierce Network:
1. Visual: Q2 2011 earnings overview of top banks
2. Firm shops ETF analysis concept
3. Does your bank's IT system comply with Dodd-Frank?
 | Leveraging Predictive Analytics in the Data Center to Manage Performance & Risk - August 9, 12 pm ET
Complex IT environments are generating massive amounts of performance, metric, and alert data every day. It’s becoming increasingly difficult to sort through this information in a timely manner to take actionable steps to manage risk & minimize outages, improve operational efficiencies, or identify new growth opportunities. View this webcast to learn more. |
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XBRL at the finish line: Was it worth the effort?
It's hard to believe, but we are close to the final deadline for initial XBRL implementation. Many companies are already in compliance--more than 1,800 companies have so far filed in the new format--while others making their final preparations. The last group--basically the smallest public companies--are now on the compliance hot seat as all statements for periods that end on or after June 15, 2011, must be tagged in the new format.
This is only the beginning of the XBRL era, mind you. We are far from the end given the phased approach the SEC has adopted. In the first year of compliance, companies must tag individual items (dollar values generally) in the primary financial statements, while footnotes and certain financial schedules are individually tagged as blocks of text. In the second year, each amount in the notes and financial schedules must also be tagged. So the process will continue for at least a few years. There may be additional requirement along the way. Most agree that the second year of compliance looms as much more complex than the first. "You may get through this summer," one expert tells ComputerWorld. "But, next summer could be four to five times as difficult." Most companies of course have opted for consultants to essentially do there tagging for them. In any case, it seems that most companies are faring well, though compliance hasn't always been cheap. The most common mistakes so far have been tagging negative numbers incorrectly and a desire to format statements so they replicate paper statements, which is not necessary and a waste of resources. But while issuers have worked through all the tagging issues, you have to wonder if the grand effort will be worth it. We are seeing very few applications that take advantage of XBRL data, despite predictions of a whole new era in data visualization, one that would make arcane financial data more accessible than ever to the investors large and small. The possibilities are plentiful but it requires some action on the part of companies that want to present its data and research companies that want to represent the data of to investors and other customers. We eventually would like to see nice Flash-like charts and drill-down capabilities. If a top brokerage firm put their minds to it, I'm sure the results would be amazing. As of now, we're not seeing it. So it is with interest that we note a contest by US XBRL: The XBRL Challenge, which aims to uncover the first generation possibilities. A $20,000 prize awaits the company, team or individual who submits "the most inventive and useful application" leveraging XBRL-formatted data from the EDGAR database. - Jim Read more about: compliance, XBRL, financial statements, Data Visualization
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Today's Top News PCAOB presses case for narrative in financial statements
Last month, the PCAOB, which is setting an aggressive tone under new chairman James Doty, set forth some proposed changes to the form of audited financial statements. Comments aren't due until the end of September, but people are already voicing some opinions. The idea is to ask auditors to provide more color and commentary about the results. This has long been sought by shareholders advocates, though the ideas floated make issuers somewhat nervous. The four proposals include the following: - Requiring a new "Auditor's Discussion and Analysis" section, which would amount to a narrative about the results.
- Requiring auditors to highlight significant areas of focus during an audit via emphasis paragraphs, which are little used now.
- Expanding assurance on information outside the financial statements, such as a company's MD&A disclosures, non-GAAP financial measures and earnings releases.
- Clarifying the meaning of key terms used in the audit report and explaining significant audit concepts.
The first proposal has generated the most controversy so far. Indeed, two PCAOB members--Jay Hanson and Daniel Goelzer--have already warned constituents about the possible negative consequences of a "narrative" requirement. The thrust of the argument is that auditors are not analysts or consultants, and "are not trained to evaluate and communicate the overall business and strategic risks of the companies they audit." Any additional information should come from executives or the board, they say. The requirement might also result in various delays to audited results. But proponents of the narrative requirement argue that they just want information about the processes used by auditors and various judgment calls. This is a refreshing conversation in that the current form of the financial statement dates back to the 1940s. Some change may be in order. It's just a matter of what. For more:
- here's an article from lawyers at Fried Frank Related articles:
Should companies be forced to rotate audit firms?
PCAOB taken to task over KPMG-Bermuda review
PCAOB looking at auditor performance Read more about: shareholders, issuers, financial statements, Audit Report
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| The future of high frequency trading
July 27, 2pm ET / 11am PT
These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register Today! |
After nine years, lessons from Sarbanes Oxley compliance
Let's start this with some good news on the ninth anniversary of Sarbanes-Oxley. According to the "2011 Sarbanes-Oxley Compliance Survey" by Protiviti, nearly 90 percent of more than 400 respondents said the recession didn't make a dent in compliance, and 45 percent said that internal control over financial reporting at their companies has improved over the last year. This confirms the general sense that big companies especially have grown comfortable with their Sarbox processes. But this comfort has been hard won. It has taken two major auditing standards--No. 2 and No. 5--a lot of clarification, a lot of tough talks with auditors and consultants and plenty of trial an error. Only now are companies more comfortable about the idea of moving previously outsourced work back in house, where they can do it cheaper. Indeed, the costs of compliance continue to trend down. But these cost reductions have come over the course of nine years. What does this mean for Dodd-Frank and other major reform laws? It's hard to generalize, but part of the tremendously energetic response by the financial services and other industries to various pieces of Dodd-Frank is driven in some part by the Sarbox experience. Companies certainly do not want a repeat of the days when confusion reigned and anger mounted. It's much better to get the specifics hammered out now, instead of relying on a white-knuckle period of trial and error. But the process in the end was worth it. The Sarbox story at most companies had a happy ending. We can only hope for the same when it comes to various Dodd-Frank reporting and other provisions. We can see hedge funds, for example, benefiting in some ways from the registration requirement imposed by Dodd-Frank. Hopefully, this will hold true in other areas. For more:
-here's a look at the survey from Business Finance Related articles:
Sarbox compliance still going strong
Dodd-Frank repeals ban on interest-paying business accounts
Get ready for the Consumer Financial Protection Bureau Read more about: compliance, hedge funds, Protiviti, auditing
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Small companies weigh in on IFRS move
The transition to IFRS is a hot-button issue once again, as the SEC has floated the idea of "condorsement" as a possible path to adoption in the United States. For small companies, the big issue has long been a rather simple one: Why? For these companies, the switch will be painful and suck up more resources given that they are not nearly as well positioned to embrace the new standard as are the big multinational companies. The MNCs have already started to file under the international standard in many cases. At a recent event, as noted by CFO.com, small companies sounded off on the potential condorsement path by noting that they would prefer a Big Bang approach. That is, they would prefer a date certain deadline by which they were be forced to comply, to the hit all at once. The alternative, they fear, is a dribbled-out approach that would force them into a long-term effort to muddle through that ultimately would be very costly and distracting. One CFO called this approach "death by increments." One issue here is whether smaller companies will be given a different adoption schedule than large companies. This is not unusual when it comes to onerous regulations. Recall that nonaccelerated files were given a series of reprieves on Section 404(b) of Sarbanes-Oxley, which allowed them to escape the provision for many years. Ultimately, they were given a permanent reprieve. Non accelerated files were also given an temporary exemption from various proxy rules required by Dodd-Frank. So we may see something similar with IFRS. For more:
- here's the article Related articles:
Big investors weigh in on IFRS and FASB, as "condorsement" gains traction
Firms clash over accounting rules
SEC offers new potential path to IFRS Read more about: Ifrs, Multinational Companies, SEC
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The war on Dodd-Frank continues
To a remarkable degree, Dodd-Frank remains a perpetual work in progress. Since the landmark reform legislation was passed into law a year ago, the war to frustrate it has steadily grown. Already, foes of the bill can claims some important victories. We're seeing delays to crucial pieces of financial reforms as well as proxy reforms. The law instructed financial regulators to conduct 73 studies and write 400 new rules. As of July 1, only 38 of those rules--most of which are aimed at banks and systemic risk reduction--have been finalized, according to law firm Davis Polk & Wardel. At the same time, two dozen bills have been proposed in Congress attempting to dismantle parts of the law.Business lobbying groups across the board have argued that too many new regulations could snuff out the start of an economic recovery. The financial services industry has led the charge, as companies like Goldman Sachs engage the process with a new ferocity. This is bearing fruit. It's fair to say, for example, that the effort to create a more sophisticated clearing and settlement system of trading for the OTC derivatives markets has been duly influenced by Wall Street lobbyists. The Durbin Amendment was watered down. And certainly the foes of Dodd-Frank and the new CFPB can claim another victory when it was decided that Elizabeth Warren will not lead the new bureau. But all in all, it's still too early to rule on the legacy of the law. Given the resource situation, the SEC can only do so much. It will be years before the dust finally settles and affords a chance to determine if the effect was as far-reaching as intended. The same could be said of the landmark healthcare bill signed a few years ago. For more:
- here's a look at the issues from the New York Times Related articles:
SEC approves, delays registration requirement for funds
Dodd-Frank rules on OTC derivatives to be delayed
Barney Frank, Wall Street rock star Read more about: Goldman Sachs, Systemic Risk, Reform Legislation, Dodd Frank
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Tip of the Week Is an annual corporate responsibility report a good idea?
State Street has released its most recent corporate responsibility report, which details its environmental, social and governance performance for 2010 and its goals for the coming years. The press release duly touts the bank's achievements when it comes to its employees' volunteer service hours, its direct CO2 emissions, its investment record in this area and its progress on environmentally friendly commuting. The release also notes its environmental progress including its purchases of renewable energy, its decrease in oil and consumption and its progress on total waste. The report touts how the bank's "new offices in Hangzhou, China are on track to achieve gold level certification in Leadership in Energy and Environmental Design (LEED) and its offices in Sydney, Australia achieved a five-star rating from the Green Building Council of Australia's Green Star system as well as a 4.5 rating from the National Australian Built Environment Rating System (NABERS)." So what do we make of such reports? On the one hand, cynics will always argue that this sort of thing is a mere public relations ploy. But not everyone is a cynic, and the report seems like a good way to get your message out. To the extent that your company has a significant story to tell in this regard--and many do--it is a good idea to share this with shareholders and customers. State Street has made the report available in a nice format on its web site. Not a bad idea, all in all. For more:
- here's the release
- here's the site Read more about: shareholders, governance, Corporate Responsibility Report
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Also Noted
> The big picture on cyber attacks. Article
> Security experts knock Google. Article
> Credit raters take closer look at governance. Article
> Security breaches seen as a brand issue. Article
> ISDA says swaps market is safer. Article
> Small businesses fear Dodd-Frank. Article
> Insurer avoids Dodd-Frank by selling deposit gathering unit. Article And Finally... iPad still dominates Android in the enterprise. Article > The future of high frequency trading, July 27, 2pm ET / 11am PT These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register today!
| > Health Market Science Compliance Webinar: CMS 6028 and You - August 9 Join Mike Sharp, former pharmacy director, Indiana Office of Medicaid Policy and Planning, and HMS experts as they outline cost-effective prescriber enrollment options, easy access to current prescriber data and best practices for data integration & operational excellence. Learn more and register here.
| > Whitepaper: IT GRC Turning Operational Risks into Returns Recent financial upheavals have resulted in a wave of increased regulations. As a result, companies across the spectrum must implement an effective IT governance, risk and compliance (GRC) framework. Download this white paper to learn how to turn IT GRC processese into strategic assets. | |
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