U.S. considers costly switch to international accounting rules

January 6, 2009 (usatoday.com) - In a regulatory sea change that could cost billions of dollars, thousands of U.S. companies plus foreign corporations that do business here will adopt global financial reporting rules within five years if regulators have their way. The long march to IFRS would be grueling and the preparations expensive to carry out. Companies would need two to three years to upgrade their communications and software systems and to train many thousands of financial professionals. Regulators, CPAs and investors would need to intensely study global accounting principles. Business schools would have to teach students the new accounting.

IFRS to be tested

January 6, 2009 (reuters.com) - Europe is now going through a recession for the first time since the introduction of IFRS (International Financial Reporting Standards) in 2004, and the new accounting framework is now being tested

Universal language: IFRS and XBRL

January 2, 2009 (grantthornton.com) - In a global economy, much can be lost in translation. Language and cultural barriers notwithstanding, applying different standards to financial information from various countries can make comparison difficult and transparency nearly impossible. International Financial Reporting Standards (IFRS) and eXtensible Business Reporting Language (XBRL) aim to remedy these obstacles and could become standard practices in the near future. Boards of governance need to understand the impact IFRS and XBRL will have on their organizations.

Which One When?

January 2, 2009 (cfo.com) - FASB and the IASB have already committed to converging their respective standards by 2011, which, if accomplished, would effectively blur the distinctions between the two. "Change is coming to revenue-recognition and leasing standards," for example, regardless of the decision on IFRS, FASB project manager Peter Proestakes said at a November conference in Boston. "If we don't get a mandate, we'll continue to go project by project."

Why IFRS Is A Strategic Accounting Initiative

December 29, 2008 (accounting-financial-tax.com) - Many experts believe that, in the longer run, IFRS will have a positive influence on management practices. It will impact not only goodwill and accounts for pensions, but also major governance issues. For instance, how companies recognize revenue.

Rulemakers Launch Revenue-Recognition Makeover

December 29, 2008 (cfo.com) - The accounting boards aim to make a dent in a mile-high stack of problems facing companies in terms of reporting sales that are linked to customer contracts. The Financial Accounting Standards Board and the International Accounting Standards Board issued a joint discussion paper on revenue recognition rules, asking constituents for comments by June 19, 2009. The six-month review period, and the fact that the boards issued a discussion paper ahead of a draft rule proposal, indicates that the issues to be debated are complex.

FASB, IASB Issue Revenue Recognition Paper

December 29, 2008 (webcpa.com) - The discussion paper is the latest step in a joint project that the two standard-setters have been working on as they continue to converge U.S. and international accounting standards. Revenue recognition requirements in U.S. generally accepted accounting principles differ from those in International Financial Reporting Standards and both are considered in need of improvement.

US CFOs back early IFRS adoption

December 29, 2008 (accountancyage.com) - The latest survey results from Deloitte show almost half (42%) of more than 200 finance professionals representing companies of various sizes and industries surveyed in November indicated they would consider implementating IFRS sooner than 2014, if they were permitted under the mandated adoption date proposed by the SEC recently. This is a significant increase on a similar Deloitte IFRS study conducted earlier in 2008 showing 30% of respondents willing to consider adopting IFRS, if given the opportunity.

Rules to enlighten investors

December 24, 2008 (seacoastonline.com) - For public companies, interactive data financial reporting will occur on a phased-in schedule beginning next year. 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 will cover 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 as 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.

Revenue-recognition errors and faulty internal controls send the finance chief and two other executives packing.

December 22, 2008 (cfo.com) - Medical-device maker ArthroCare Corp. says its CFO and two other officers have quit after its audit committee identified accounting errors and other possible irregularities. The errors are categorized into four areas: revenue recognition, expense reclassification, purchase-price allocation or intangible-asset impairments in connection with the company’s acquisition of DiscoCare, and foreign-exchange translation.

Revenue recognition tops list of financial statement chicanery

December 15, 2008 (deloitte.com) - Of the 352 companies cited by the Securities and Exchange Commission for financial statement fraud from 2000 to 2007, 70 percent experienced a stock price decline and, of those, more than half (53 percent) experienced a decline of at least 50 percent, according to a new study from the Deloitte Forensic Center, titled “Ten Things About the Consequences of Financial Statement Fraud.

Market Reaction to the Adoption of IFRS in Europe

December 15, 2008 (hbs.edu) - How do investors in European firms react to a change in financial reporting? Prior to 2005, most European firms applied domestic accounting standards. The adoption of International Financial Reporting Standards (IFRS) would result in the application of a common set of financial reporting standards within Europe, and between Europe and the many other countries that require or permit application of IFRS. This study investigates the equity market reaction to 16 events associated with the adoption of IFRS in Europe. Overall, the researchers' findings are consistent with investors expecting the benefits associated with IFRS adoption in Europe to exceed the expected costs.

A Holiday Reconciliation Gift from the EU

December 15, 2008 (cfo.com) - The EU says it views U.S. GAAP — as well as the local accounting standards of Japan, China, South Korea, Canada, and India — as being "equivalent" to international financial reporting standards. As a result, companies in those countries will continue to be able to use local GAAP and list on European stock exchanges, rather than having to switch to IFRS.

EU Accepts Accounting Rules of U.S., Japan, 4 More Countries

December 15, 2008 (bloomberg.com) - The finding of “equivalence” allows companies that have securities traded on markets in the EU, such as PetroChina Co., to report earnings under the rules they use at home. Otherwise the companies would have to reconcile their books to IFRS, costing millions of dollars a year.

PCAOB Finds Deficiencies Galore

December 9, 2008 (businessfinancemag.com) - In a review of its first four years of inspections of the eight largest U.S. audit firms, the Public Company Accounting Oversight Board (PCAOB) reveals a wide range of problems in important audit areas, including revenue testing, fair value measurements, and determination of materiality and audit scope. Not surprisingly, audit firms ran aground on complex revenue-generating transactions and processes such as estimated fair values of all elements in arrangements with multiple deliverables. But they also failed to observe basic principles of revenue recognition, such as the timing and booking of revenue in connection with the sale of goods.

PCAOB to Auditors: Turn Up the Skepticism

December 9, 2008 (cfo.com) - n its latest summary of its inspections of the eight largest audit firms — covering four years of reviews — the Public Company Accounting Oversight Board pings the auditors for failing to use enough professional skepticism in their audits of companies' financial statements.

U.S. CPAs Show Growing Acceptance of IFRS

December 4, 2008 (marketwatch.com) - A 55 percent majority of CPAs at firms and companies nationwide now say they are preparing in a variety of ways for adoption of IFRS, an increase of 14 percentage points from 41 percent who were preparing for change according to an AICPA survey in April.

U.S. and European Companies Differ on IFRS Move

December 1, 2008 (webcpa.com) Companies in the U.S. and Europe generally favor the move to International Financial Reporting Standards, but European companies are much more skeptical about the process. A study by professors Tim Buthe of Duke University and Walter Mattli of Oxford University found that a majority of the 749 CFOs they surveyed from the U.S., Germany, France and the United Kingdom favor international standards, but 40 percent question whether global accounting standards are achievable.

IFRS No Panacea for Revenue Reporting

November 25, 2008 (businessfinancemag.com) - Detractors of International Financial Reporting Standards (IFRS) have another arrow in their quiver to help them assail their target. A recent survey by RevenueRecognition.com of senior finance executives in the United States and 34 other countries reveals that IFRS affords no relief from the complexities of revenue processes and isn't likely to lead to a reduction of errors in revenue reporting.

IFRS: Another Cost Guessing Game

November 25, 2008 (cfo.com) - Advocates of the U.S. moving toward using IFRS rather than GAAP claim the changes will bring investors and firms many benefits, and make the (debatable) claim that there will be comparability between companies, across borders. Finance execs at multinationals who support the move believe they'll save money in the long run by eliminating one accounting system off their workload. But there's reluctance to give CFOs new to the topic the data they most crave: How much will converting to IFRS truly cost?

Fraud detected more often at bankrupt companies

November 24, 2008 (Reuters) - Bankrupt companies are three times more likely to have been cited for fraud by U.S. regulators, according to a study released on Monday. The study from Deloitte Financial Advisory Services LLP also showed that fraud incidents were much more likely to land a company in bankruptcy court. The most common type of fraud detected at both bankrupt and nonbankrupt companies was improper revenue recognition.

IASB Chairman Welcomes Moves Towards IFRS in North America

November. 20, 2008 (SmartPros) -- Sir David Tweedie, Chairman of the International Accounting Standards Board, welcomed recent actions by authorities in the Mexico, Canada and United States regarding their adoption of International Financial Reporting Standards.

FASB, IASB Inch Closer to Lease Accounting

November 24, 2008 (complianceweek.com) - The boards met separately this week to hash out a number of areas where they either didn’t share the same view or hadn’t yet considered the issues to try to establish fully converged views on how to write new standards for U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. FASB decided for its part that it wants to see lease terms deemed a recognition issue, which would require entities to make some upfront judgments about their likely obligations over the expected life of the lease if they have some uncertainty about their ultimate obligations.

Is the SEC Soft-Pedaling IFRS?

November 20, 2008 (cfo.com) -- To be sure, some observers have opined that the SEC is too far down the convergence road to turn back. But in his speech, Cox, a longtime champion of unified accounting standards who has said he will leave his post early next year after Barack Obama appoints a successor, pointed to a window that's been left wide open for a potential retreat.

Former Speaker Of House Of Representatives Wants Sarbanes-Oxley Act Repealed

November 18, 2008 (ecmconnection.com) - Sarbanes-Oxley Act, that was passed in 2002 after devastating accounting irregularities of Enron and WorldCom, is now starting to see open criticism from the likes of Newt Gingrich (former speaker of the House of Representatives and general chairman) and David W. Kralik (director of Internet strategy and manager of the Silicon Valley office of American Solutions). The effect of Sarbanes-Oxley in Silicon Valley has been especially dramatic. In the second quarter of 2008, there were no public offerings of Silicon Valley venture capital-backed companies, a phenomenon not seen since 1978.

Wrinkles in the IFRS Roadmap

November 18, 2008 (cfo.com) - American companies that are allowed to use international accounting rules in their U.S. filings next year will still have to hold onto their U.S. GAAP knowledge. In its proposed plan for transitioning all publicly traded companies to international financial reporting standards, the Securities and Exchange Commission has given commissioners room to change their minds in three years — raising the possibility that early adopters of its proposal will have wasted their time.

IFRS Requires a Soft Touch

November 18, 2008 (cfo.com) - If American companies plan on moving to IFRS, their financial statement preparers will require less technical training and more instruction on "soft skills." Corporate accountants facing a move to IFRS are quick to say they will need technical training. But their toughest task may actually be mastering "soft skills," says Richard Fuchs, PricewaterhouseCoopers partner and global IFRS specialist. Fuchs says a move from U.S. GAAP to IFRS will require training in how to apply judgment, analysis and critical thinking to accounting standards, as well as how to make transparent disclosures.

It’s Here: IFRS Roadmap Posted For Comment

November 18, 2008 (complianceweek.com) - The Securities and Exchange Commission has finally posted for comment its long-awaited roadmap for the potential use of International Financial Reporting Standards by U.S. issuers for their filings with the Commission. The 165-page roadmap sets forth seven milestones that, if achieved, could lead to the required use of IFRS as issued by the International Accounting Standards Board by U.S. issuers in 2014 if the Commission believes it to be in the public interest and for the protection of investors. The commission voted to publish the roadmap back in August.

IFRS to cost $3.5bn for US conversion

November 18, 2008 (accountancyage.com) - The total cost of converting eligible companies to using international accounting standards will amount to around $3.5bn, according to the US financial watchdog. Individual companies could pay as much as $32m for conversion though the Securities and Exchange Commission estimates that only 110 companies will be able to convert. The SEC revealed the estimated costs in its roadmap to IFRS conversion unveiled at the end of last week. The SEC is working towards a decision in 2011 for implementation 2014.

SEC May Finally Publish IFRS Roadmap

November 7, 2008 (webcpa.com) The Securities and Exchange Commission is expected to publish the long-delayed roadmap for transitioning to International Financial Reporting Standards on Friday. Back in August, Cox promised the SEC would soon issue a "concept release" detailing the roadmap, but it has not yet appeared. The economic turmoil of the past few months has been blamed for the delay, but the SEC reportedly wants to publish the roadmap before the Obama administration takes office, according to the U.K. publication Accountancy Age.

IFRS accounts ‘no easier to compare’, says Moody’s

November 6, 2008 (accountancyage.com) Inconsistent interpretations and a lack of standardisation in certain areas means that accounts prepared under IFRS are no easier to compare than they were under local GAAPs, according to a new study. The report from Moody’s, entitled ‘Are we better off under IFRS,’ raises serious questions about whether comparability of company accounts can be achieved and could provide strong ammunition for those opposed to US adoption of the standards.

New survey by revenuerecognition.com finds 34% of companies at high risk for revenue reporting errors

September 12, 2008 (RevenueRecognition.com) A recent survey by RevenueRecognition.com of senior financial executives from 586 companies, found that companies rate revenue recognition accounting as having the greatest risk for errors and inaccuracies by a margin of three to one over other key finance and accounting processes. Revenue recognition accounting also ranked number one for being the most complex to manage and for errors having the highest level of materiality to financial statements.

IFRS Transition: A Casualty of the Economic Crisis?

November 4, 2008 (businessfinancemag.com) A new survey by Protiviti Inc., a consulting and audit firm, confirms that U.S. companies are dragging their feet. Forty-eight percent of respondents say their company has made no preparations to date about IFRS and most companies don't have a project management office assigned to lead a transition to IFRS. CFOs cite the greatest barrier to IFRS as costs, educating financial statement readers, learning new standards, and setting up initial reporting formats. Chief audit executives view introducing cultural change and implementing information technology change management processes as barriers and internal audit managers believe coordination with international operating units and updates to financial systems would be difficult in the transition period.

GC Leaves Troubled Silicon Valley Tech Company

November 4, 2008 (law.com) There's a big ol' mess going on over at Cadence Design Systems in San Jose, Calif. -- and the company's longtime GC has resigned. Cadence, which makes tools used to produce integrated circuits and the like, announced last week that it had a revenue recognition problem and would have to make a restatement. Apparently, $24 million that the company counted as revenue from sales contracts in the first quarter of 2008 should've been recorded over the life of the contracts.

Marvel sees weak 2009 on early revenue recognition

November 4, 2008 (Reuters) - Comic book publisher Marvel Entertainment Inc posted a 39 percent rise in quarterly profit recognizing revenue from films earlier than expected, resulting in a stronger outlook for 2008 but weaker for next year. It took Marvel one year to figure out what analysts knew all along, which is that it cannot defer film revenue, Wedbush Morgan Securities analyst Michael Pachter said.

Cadence Announces Accounting Review

October 22, 2008 - Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced that it is reviewing, in conjunction with the company’s independent accountants and legal advisors, the recognition of revenue related to customer contracts signed during the first quarter of 2008.

Revenue Recognition Rules Hamper Biotech Firms

October 14, 2008 (cfo.com) As the Financial Accounting Standards Board wrestles with ways to fix revenue recognition accounting, biotechnology firms say they are facing what one new study calls "unnecessary hurdles" caused by the outdated existing standard. The rules complicate accounting in biotech because they tend to employ extensive collaborative arrangements with other companies for research and distribution.

Eight Years Later, Ex-CFO Sentenced

October 3, 2008 (cfo.com) The former CFO of Network Associates Inc. — now called McAfee Inc. — was sentenced to a year and a day in federal prison for his role in a scheme to falsify financial statements, The San Francisco Chronicle reported. Prabhat Goyal must also pay a $200,000 fine, according to the paper. In December 1997, Goyal was named Network Associates's founding CFO and vice president of finance and administration. In late 2000, he was forced to resign, and the company restated its results and changed its accounting methods. The company paid $50 million in 2006 to settle Securities and Exchange Commission charges that it inflated revenue by a total of $622 million from 1998 through 2000.

IFRS: The Dawn Of A New Era In Accounting

September 2008 (metrocorpcounsel.com) IFRS differs from U.S. GAAP in that it is principles-based rather than rules- based, which may lead to less revenue being deferred and more being realized. IFRS provides less detail including significantly less industry specific instruction and less extensive guidance for areas like revenue recognition. For example, the general revenue recognition criteria are similar between U.S. GAAP and IFRS; however under U.S. GAAP there are over 100 citations for revenue recognition. Consequently, many IFRS reporting companies look to U.S. GAAP for guidance to formulate accounting policies for specific transactions.

AICPA Mulls IFRS for Private Companies

September 22, 2008 (webcpa.com) The American Institute of CPAs’ Private Company Financial Reporting Committee held a meeting to discuss whether International Financial Reporting Standards should apply to private companies in the U.S., along with other matters. Judy O’Dell, chair of the PCFRC, said the committee did not come to any definite decision on the matter.

Novatel: Revenue Recognition Is OK After All

September 17, 2008 (cfo.com) -- Four months after Novatel Wireless announced an internal accounting review of its revenue-recognition practices, it has concluded that no restatement is necessary. The company said it does not expect to report any material weaknesses in its filings for the first two quarters of 2008, which were delayed pending completion of the review. The broadband company's audit committee also found that there was no accounting misconduct by the senior management team, Novatel Wireless said.

Accounting convergence in sight

September 11, 2008 (globalpensions.com) -- Of the eleven elements of convergence on the IASB / FASB roadmap, seven have been completed, reached similar conclusions or are in the process of having common standards agreed upon, while in the other four areas, both bodies were “at different stages” in the process, but trying to “minimise differences” between them.

IASB and FASB Publish Update to 2006 Memorandum of Understanding

September 11, 2008 (BUSINESS WIRE) -- The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today published an update of their 2006 Memorandum of Understanding (MoU). The Boards are issuing this update to report the progress they have made since 2006 and to set the goal of completing their major joint projects by 2011.

IFRS Compliance: Technology Architecture is Key

September (insurancetech.com) — The SEC's recent release of its IFRS (International Financial Reporting Standards) Roadmap set insurance companies on a course headed for early adoption, which means preparation has to begin today. Understanding the technical accounting involved with adjusting financial statements for the three year period prior to conversion, as required by the IFRS Roadmap, is clearly only the starting point. Execution and success will depend on understanding and implementing the appropriate financial and reporting technology architecture.

SEC Proposes Roadmap Toward Global Accounting Standards

Aug. 27, 2008 (sec.gov) — The Securities and Exchange Commission today voted to publish for public comment a proposed Roadmap that could lead to the use of International Financial Reporting Standards (IFRS) by U.S. issuers beginning in 2014. Currently, U.S. issuers use U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Commission would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. The proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the Commission.

IFRIC 15: Revenue Recognition Rules Hark Back to Not-So-Good Ole Days of U.S. Accounting

September 3, 2008 (accountingonion) — With the SEC's publication of their proposed roadmap for the U.S. adoption of IFRS, all of the press coverage I have been reading has focused on the big picture. But in the background, the IASB has been conducting its business as usual: drawing squiggly lines in the sand, vaingloriously dubbed principles-based standards. IFRIC 15 is a perfect example, as I shall now commence to explain.

Can Your CIO Spell IFRS?

September 3, 2008 (cfo.com) — In the nation's finance departments, the wince-inducing memories are still fresh of having to lean on IT for help deciphering Sarbanes-Oxley. Yet CFOs are being faced once more with turning to their technology counterparts for guidance in a major financial reporting project. The job this time — converting to a new accounting language — could require changes to IT systems, too. Accounting experts are recommending that those conversations begin now, as the Securities and Exchange Commission inches toward mandating that all U.S. publicly traded companies use international financial reporting standards.

International Accounting Standards Board Chairman Sir David Tweedie

September 1, 2008 (cfo.com) — The overseer of a coming accounting revolution opines on U.S. companies' inevitable, eventual shift to IFRS. To assuage fears that such an organization could become a supranational lawmaker answerable to no one, IASB's parent organization has begun to create its own overseer, a global monitoring group made up of regulators around the world, including the SEC. Meanwhile, Tweedie and his U.S. counterpart are rushing to replace some of America's most critical accounting standards, accelerating what was once called "convergence" but which now looks a lot more like conversion.

Fair-Value Revolution

September 1, 2008 (cfo.com) — The initial challenge in meeting the requirements of FAS 157 entails sorting each fair-value estimate into one of three levels, or "buckets." In bucket 1, the value of an asset or liability stems from a quoted price in an active market; in bucket 2, it is based on "observable market data" other than a quoted market price; and in bucket 3, fair value can be determined only through "unobservable inputs" and prices that could be based on internal models or estimates. It's that third bucket that critics say has some serious holes.

Section 404 triggers another restatement at Force Protection

August 29, 2008 (Reuters) — Defense contractor Force Protection said it will restate its results for the first and second quarters of 2007 due to accounting errors. This is the second such announcement from the company in less than six months, pushing its share price down 19%. The errors apparently stem from—wait for it—a material weakness in internal financial controls. That weakness has led to errors in the recognition of the value of revenue, certain accrued liabilities, inventory and deferred taxes in the proper quarterly periods.

FASB fine with SEC’s accounting proposal

August 28, 2008 (pionline.com) - FASB has given a ringing endorsement to an SEC proposal that could lead to the use of international financial reporting standards by U.S. issuers of securities starting in 2014. “By setting a proposed road map, the SEC has provided forward momentum to the goal of setting high-quality accounting standards both in the U.S. and internationally, and we’ve been strongly committed to this goal since 2002,” FASB spokesman Neal McGarity said in an interview today. Mr. McGarity declined to comment on what might happen to FASB if the SEC proposal becomes reality.

Revenue-Recognition Error Forces a Restatement

August 28, 2008 (cfo.com) - Shanghai-based Sunrise Real Estate Group Inc., which trades in the U.S., is restating prior results after determining that it misapplied revenue-recognition accounting rules. Sunrise said it revised its annual financial statements for 2007 and 2006, and for the March quarter. The new numbers increase the company's deferred tax assets and deposits received from underwriting sales. They defer revenue recognition to the consummation of the sale, generally when the remaining maximum exposure to loss is reduced below the amount of gain deferred, the company filing said.

SEC May Let Companies Abandon U.S. Accounting Rules

August 27, 2008 (bloomberg) - The Securities and Exchange Commission may force some U.S. companies to switch to international accounting rules in six years, a step it says will lower compliance costs and make American firms more competitive. SEC commissioners today approved a ``road map'' that might require large corporations to abandon U.S. accounting standards by 2014. Under the plan, about 110 companies would start following international rules even earlier.

Big Shift in Accounting Rules Nears

August 28, 2008 (businessweek.com) - Under the SEC's proposal, the very largest U.S. companies, approximately 110 in all, could be eligible to file their 2009 statements using the international standard. Smaller companies could phase in after that. The SEC would keep track of the experience of those early adopters as well as continue to study the companies in Europe and elsewhere that already use the global rules. By 2011 the commission would make a final determination as to whether all companies would have to switch. All U.S. companies could be using the standard in 2014.

IPOs Hit a 30-Year Low

September 2008 (inc.com) - Initial public offerings are to the venture capital business what summer blockbusters are to Hollywood. They're extraordinarily lucrative -- but also hard to pull off. For all of the hoopla about IPOs, only 3,643 venture-backed companies have gone public over the past three decades, for an average of just 30 a quarter. Still, 30 is a lot compared with zero -- and that's the number of VC-backed companies that went public in the second quarter of 2008. It's the first time since 1978 that the industry posted a goose egg, and it represents a huge drop from the 25 companies that went public during the same period in 2007.

Top-Rated Stocks That Get Low Grades

August 25, 2008 (fool.com) - Institutional Shareholder Services -- the big name in corporate proxies -- measures how well a company performs in as many as 63 categories, covering four broad areas. Moreover, each company is scored relative to its market index and its industry group. It assigns the stocks a rating that it calls its Corporate Governance Quotient, or CGQ. Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations.

Tumble in restatements sparks criticism of SEC

August 25, 2008 (financialweek.com) - A steep decline in restatements and material weaknesses this year might seem to stem from improvements in the internal controls of public companies as a result of the Sarbanes-Oxley Act. But some observers say the drop-off has more to do with a sleepier securities watchdog. While a report released earlier this month by a Securities and Exchange Commission advisory committee recommended the agency issue guidance relaxing its standards for restatements and redefining what counts as a material error, critics say the SEC has already softened its approach.

Top investors slam EU plans to "protect" auditors

August 25, 2008 (reuters.com) - European Union plans to limit how much investors can sue auditors for will encourage accountants to take shortcuts and harm standards, a group of heavyweight investors said on Monday.

IFRS calls for decisive shifts in strategic management

August 20, 2008 (hindu.com) - To those who worry whether as a country we are focused in effectively dealing with the change, it should be comforting to hear that “we have made a good beginning,” as opines Mr Kaushik Dutta, the leader of IFRS practice of PricewaterhouseCoopers. He draws our attention to the concept paper issued by the ICAI (Institute of Chartered Accountants of India) which clarifies a lot of doubts and gives a clear roadmap towards IFRS convergence.

Under IFRS revenue, earnings to take on new meanings

August 13, 2008 (financialpost.com) - A general theme that will emerge over the next few years is that IFRS is much less prescriptive than either Canadian or U. S. accounting rules. In other words, IFRS contains basic guidance but stops short of addressing many industry or situation-specific issues. Therefore, differences in reported revenue will arise when companies switch over. In the area of revenue recognition, there are several differences between North American accounting and IFRS, including the recognition of up-front payments, the evidence of whether a sales arrangement exists, and the recognition of what are known as multiple-deliverable arrangements.

Revenue Recognition - C-SOX testing procedures

August 2008 (gfsconsulting.ca) - Revenue recognition has been the area where the majority of accounting misreporting and restatements have occurred. As a result, RRR business processes (Revenue, Receivables and Receipts) must be carefully reviewed, to ensure that internal controls are fundamentally strong and the key controls exist to prevent and detect errors and irregularities.

Material Weaknesses Plunge at Large U.S. Companies, Exclusive Compliance Week Analysis Shows

August 05, 2008 (businesswire.com) - America’s largest public companies reported only a handful of glaring weaknesses in their financial accounting last year, according to an exclusive Compliance Week analysis released today. The numbers are a dramatic plunge from the hundreds of weaknesses disclosed only a few years ago and are further proof that the Sarbanes-Oxley Act, as onerous as it may be, is accomplishing its goal of making corporate financial statements more reliable.

Big-Company Audit Fees Ease Up

July 29, 2008 (businesswire.com) - A new analysis from Compliance Week found that audit fees paid by large companies rose 3.2 percent (median) in 2007. In 2006, fees rose 4.4 percent. If you exclude a few companies with extraordinary burdens, audit fees in 2007 actually fell 0.3 percent. That would be the first decline since Sarbanes-Oxley kicked in.

Activision Off Post Earnings

August 1, 2008 (Barrons.com) - The company indicated there would be some GAAP price to pay as it changes its revenue recognition policy for games with a significant online component; it will recognize both revenue and costs for some games over a 6-month time period rather than upfront. And it also said that it now thinks its calendar 2008 results will exceed its previous guidance for calendar 2009.

ArthroCare Announces Informal Inquiry by SEC

July 24, 2008 - ArthroCare Corp. (NASDAQ: ARTC) - announced today that it has been informed by the SEC's Fort Worth District Office that the Staff of the SEC's Division of Enforcement is conducting an informal inquiry into accounting matters related to ArthroCare Corporation arising out of the Company's recently announced restatement of financial results. The Company stated that it will cooperate fully with the SEC.

ArthroCare to Restate Financial Statements

July 21, 2008 - ArthroCare Corp. (NASDAQ:ARTC) - announced today that it will restate its financial statements for the years ended December 31, 2006 and 2007, the quarters ended September 30, 2006, December 31, 2006, each of the quarters of 2007 and the quarter ended March 31, 2008, as a result of the determination by the Audit Committee of the Board of Directors on July 20, 2008, that the financial statements for such periods can no longer be relied upon. The restatement follows a recommendation by management that revenue in these previously issued financial statements should be adjusted because: the relationship between the Company and DiscoCare, Inc. during the periods being restated was a sales agent relationship, rather than that of a traditional distributor; and that the sales price of products sold to State of the Art Medical Products, Inc.("SOTA"), Boracchia & Associates and Clinical Technology, Inc. cannot be considered fixed or determinable upon shipment by ArthroCare during the periods being restated.

Judge squashes challenge to Sarbanes-Oxley

August 25, 2008 (gazette.net) A federal appeals court in Washington, D.C., on Friday rejected a legal challenge to the Sarbanes-Oxley Act. The lawsuit questioned the constitutionality of the Public Company Accounting Oversight Board, which oversees public companies' auditors under the act. Attorneys for the government oversight board argued that other independent agencies, including the Federal Trade Commission, were not directly controlled by the president.

SEC accounting panel to seek fair-value freeze

July 28, 2008 (financialweek.com) A committee created by the Securities and Exchange Commission is planning this week to report its final recommendations for sweeping changes to the accounting system. The Committee to Improve Financial Reporting's roughly 140-page report, which may be released this Friday, will contain 25 recommendations to simplify the current accounting system. Major changes include eliminating industry-specific accounting guidance, as well as mandating the inclusion of an executive summary in corporate annual statements.

Revenue-Recognition Rules: From the Many, One?

July 17, 2008 (cfo.com) Coming this fall, a sneak peek at a slimmed-down revenue recognition rule. Software companies and other interested parties: Here's your chance to make some noise about it. The Financial Accounting Standards Board decided to publish a discussion paper that will cover key concepts regarding revenue recognition — notably, the possibility of boiling down the myriad industry-specific rules into a single general standard. Currently, there are at least 25 different industry-specific rules contained within U.S. accounting literature pertaining to revenue recognition, including separate mandates for airlines, casinos, the film business, mortgage banks, hospitals, and software companies. Under current rules, each industry named by FASB applies different revenue-recognition rules dictated by circumstances peculiar to that sector.

Accounting Plan Would Allow Use of Foreign Rules

July 5, 2008 (nytimes.com) Federal officials say they are preparing to propose a series of regulatory changes to enhance American competitiveness overseas, attract foreign investment and give American investors a broader selection of foreign stocks. Legal experts, some regulators and Democratic lawmakers are concerned that the changes would put American investors at the mercy of overseas regulators who enforce weaker rules and may treat investment losses as a low priority. James D. Cox, a securities law expert at Duke Law School who returned this week from teaching corporate law in Europe, said the shift to international rules amounted to “outsourcing safety standards.”

PCAOB Cites "Deficiencies" at PwC

July 2, 2008 (cfo.com) In its latest evaluation of PricewaterhouseCoopers, the Public Company Accounting Oversight Board scolded the firm for various "deficiencies" that typically included failing to get enough information to support its opinions about the financial statements of its clients, who in the PCAOB's lexicon are issuers. The PCAOB also criticized PwC for its handling of an issuer that sells software licenses, hardware and post-contract support. According to the report PwC failed to test whether the issuer had established vendor-specific objective evidence to support the fair value for each of its products and services.

No New Accounting Rules for Three Years?

July 1, 2008 (cfo.com) IFRS adoption was a recurring theme at a recent public forum held by the Financial Accounting Standards Board — and with that discussion came mention of a surprising idea. "If we set a date for adopting [IFRS], we need at least a one-year quiet period" during which no interpretive guidance would be issued. In addition to needing time to manage such a massive changeover, said Batavick, companies "also need a period to have their [IT] systems run two [accounting] systems." That's a reference to the fact that any changeover to IFRS will probably require U.S. companies to manage two sets of books for at least two years.

Protiviti Survey Shows Positive Impact of SEC and PCAOB Guidance on Sox Compliance

June 30, 2008 – Menlo Park, Calif. – Is it possible that Sarbanes-Oxley compliance is becoming a little easier? According to a new survey from Protiviti Inc., organizations today are realizing tangible benefits from updated regulatory rules and guidance pertaining to Section 404 of the Sarbanes-Oxley Act that were issued in May of 2007 by the Public Company Accounting Oversight Board (PCAOB) and U.S. Securities and Exchange Commission (SEC).

GAAP vs. IFRS: New accounting rules could mean trouble

June 30, 2008 (bloggingstocks.com) The move to IFRS makes a fair amount of sense given the global nature of capital markets. The problem looming on the horizon is, who will construct the IFRS balance sheets? Currently, accounting degree programs in the U.S. are defined by the requirements for the CPA exam, which does not require familiarity with IFRS. American accounting faculty, overall an older group, teach from textbooks geared towards the CPA exam. Unless and until the SEC actually publicly states a date by which U.S. companies can or must shift to IFRS, nothing will move. Conservatively, the SEC is looking at a five year lag once it finally establishes a date for the switch. At least we will all have plenty of time to get used to the idea.

Business fraud in UK rises 74%

June 30, 2008 (bbc.com) Reported fraud committed against UK firms rose 74%, costing companies £705m in the first half of the year according to the accountants BDO Stoy Hayward. Particularly hard hit were the banking and insurance sectors, where 90% of the fraud took place. Management fraud accounted for 46% of reported cases. Greed was given as the motive in 36% of the cases, with debt the reason in 25% of cases and gambling at 24%.

SEC gives small companies another year's break from SarbOx audit of internal controls

June 29, 2008 (financialweek.com) The Securities and Exchange Commission today gave small public companies a new one-year exemption from complying with the Sarbanes-Oxley Act requirement that companies’ internal controls be audited by accounting firms. The commission has approved one-year exemptions for small companies every year since the law went into effect in 2002. The latest extension means companies whose market value is less than $75 million won’t have to disclose such audit findings in their annual reports until fiscal years ending on or after Dec.15, 2009.

Canadian police charge former Nortel chief with fraud

June 20, 2008 (International Herald Tribune) The Royal Canadian Mounted Police pressed criminal charges Thursday against Frank Dunn, the former chief executive of Nortel Networks, and two other former executives of the telecommunications company. Charged along with Dunn were Douglas Beatty, the former chief financial officer, and Michael Gollogly, the former controller of the company, which is now based in Toronto. The men face various charges, including falsifying books, company documents and financial prospectuses.

NEC, Hit by Revenue-accounting Woes, Settles with SEC

June 20, 2008 (cfo.com) NEC Corp., the Japanese electronics giant mired in revenue-recognition accounting problems and wracked by fraud, agreed to a Securities and Exchange Commission revocation of NEC's securities registration in the U.S. The SEC said it took the action after NEC failed to file annual reports with the commission for fiscal years 2006 and 2007. Further, the SEC found that for fiscal years 2000 through 2005, the annual reports that NEC did file misstated revenues and net income or net loss results — in part related to improperly recognized revenues from 2000 through 2006, which reflected contracts with customers that included provision for hardware, software, and customer support. NEC also failed to maintain accurate books and records, and had deficient internal accounting controls, according to the regulator.

NYSE CEO: Sarbanes-Oxley keeping smaller companies from going public

June 18, 2008 (Financialweek.com) Congress should relax the Sarbanes-Oxley Act for small and medium-size companies because it discourages them from listing on U.S. stock exchanges, NYSE Euronext chief executive Duncan Niederauer said today. “One size does not fit all. The process is too long, too cumbersome, too expensive,” Mr. Niederauer said in a luncheon speech at the National Press Club in Washington. He described the law as the NYSE’s “biggest challenge” in getting many overseas companies to list.

IFRS: 'Buckle your seatbelts'

June 16, 2008 (accountingweb.com) The "date certain" for conversion to International Reporting Standards (IFRS) may be as soon as 2014, according to Kenneth Marshall, a partner in E&Y's Assurance & Advisory Business Services practice, which, with three-year comparative reporting, will mean that U.S. companies should begin the process of adapting their accounting and other business systems within the next eighteen months. On a practical level, the conversion to IFRS will affect the whole organization, not just accounting departments, Marshall and Robert Owens, the Deputy Chief Accountant for Alcatel-Lucent said. Accounting departments must adjust to differences in revenue recognition and the way companies capitalize development costs among other issues, but the standards change can potentially impact every aspect of the company affected by financial information; e.g., key performance indicators, employee and executive compensation plans, management's internal reporting, and all systems that are tied to financial information.

Big changes in reporting standards coming to the accounting world

June 16, 2008 (South Florida Business Journal) The accounting profession is facing its biggest changes in reporting standards and filing methods since the Sarbanes-Oxley Act. There also may be a financial windfall for accounting firms ready for the changes. The SEC has proposed the use of XBRL - new, interactive reporting software that the largest public companies must use within a year, and all other public companies within three years. The proposal is now in its comment stage before final acceptance. Experts caution an even more massive change is on the horizon: the replacement of generally accepted accounting practices (GAAP) by international financial reporting standards (IFRS). The move has been spurred by a variety of factors:

• melting international trade barriers
• advancing technology
• a proactive SEC

For public companies, their CFOs, IT staffs and public auditors, it means a totally new standard and a new software method of reporting.

IFRS looming: U.S. accounting in transition

June 16, 2008 (schulzkelaw.com) DJ Gannon, head of Deloitte’s IFRS Centre of Excellence for the Americas, said he expected the SEC to announce soon that U.S. registrants can optionally use IFRS in place of U.S. GAAP. Presumably, this optional use would be followed — after the U.S. presidential transition — by mandatory IFRS use. Meanwhile, IFRS reporting is quickly entering U.S. markets because of its global acceptance. New staff joining Deloitte this year will be involved in engagements that require knowledge of IFRS.

$550 Million FromMcKesson HBOC Settlement

June 3, 2008 (hvpress.net) The suit alleged that HBOC’s and McKesson HBOC’s accounting statements were materially false and misleading. It also alleged that HBOC’s and McKesson HBOC’s revenue recognition procedures did not conform to Generally Accepted Accounting Principles because the companies were improperly recording software sales before the consumer had actually purchased the product. HBOC and McKesson HBOC were also believed to have hidden side letters to contracts and even back dated some contracts. The suit also named Arthur Andersen, LLP, which acted as HBOC’s auditors prior to the merger, and Bear Stearns & Co. Inc., which served as McKesson’s financial advisor.

Revenue recognition: back to principles, but which ones?

June 3, 2008 (pwc.blogs.com) In this two minute video, Peter Hogarth and Katie Woods highlight some of the things to look out for in the IASB's discussion paper on revenue recognition, which is due out within the next few weeks. As mentioned in August last year, this one could be important. When changes are made to revenue recognition policies, it often leads to the market amending its conclusions about share values.

CFOs Got Bigger Pay Increases Than CEOs Last Year

June 3, 2008 (Workforce.com) Median pay for CFOs at large U.S. companies jumped 5.2 percent last year, to $2.9 million, finds a study released Thursday, May 29. More than half the overall CFO compensation consisted of equity awards, which rose 8.2 percent to a median of $1.5 million in 2007, according to the study of 313 companies by Equilar, an executive compensation research firm. Base salaries grew 9.1 percent to $525,000. The percentage increases topped those for chief executives, whose median pay rose 1.3 percent to $8.8 million last year.

Revenue Recognition for Internet Retailers: Not So Fast

June 2, 2008 (InternetRetailer) Many retailers consider their job done once they’ve shipped the order to the customer. Most recognize revenue from the sale at that time. The U.S. Securities and Exchange Commission, however, does not share that view on revenue recognition. Off-price retailer Overstock.com Inc. was forced in March to restate revenue and earnings for its fiscal fourth quarter after the SEC objected to its practice of recognizing revenue upon shipment. Overstock must recognize revenue, the SEC contended, only when the risk of ownership passes from seller to buyer, a rule that the SEC put into place in 1999. While the SEC guidance is binding only on public companies, in the absence of any explicit guidance on revenue recognition for private companies, most accountants recommend the same approach to all clients. Adopting the SEC policy is especially important for companies considering going public, and should be implemented well in advance of a public offering of stock.

On2 Technologies, Inc. Announces Restatement of Financial Statements

May 27th, 2008 On2 Technologies, Inc. (AMEX:  ONT) today announced that the Audit Committee of the Company’s Board of Directors has determined that the Company’s previously issued financial statements for the second and third quarters of 2007 can no longer be relied upon and will be restated due to errors in those financial statements related to the Company’s recognition of revenue.  The Company is providing preliminary restated results for the second and third quarters of 2007 and preliminary estimated results for 2007 and the first quarter of 2008.

VocalTec Announces Certain Changes to Revenue Recognition Implementation and Expected Substantial Impairment to Assets

May 27, 2008 – VocalTec Communications Ltd. (Nasdaq Capital Market: VOCL), a global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers, announced today certain changes to its revenue recognition implementation and an expected substantial impairment to its assets, as part of the audit of the Company's financial statements for the fiscal year ended December 31, 2007.

Acxiom's Restatement Covers Four Years

May 22, 2008 (CFO.com) Acxiom Corp. disclosed details of its previously announced plans to restate financials to correct errors in the company's accounting for accrued revenue. Historically it recorded accrued revenue for certain information services contracts based on a calculated estimate of relative value of performance for business that had occurred, but had not yet been recognized as revenue. It determined in consultation with its audit committee and board that the calculation that had been used for several years did not adequately support the accrual of revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104. The restatement reflected a material weakness in the company's internal control over financial reporting.

Eight Facing Fraud Over AOL Time Warner Ad Results

May 22, 2008 (Financialweek) Eight former executives of the unhappy dotcom merger between AOL and Time Warner have been charged with fraud for inflating the firm's online advertising revenues by more than $1bn. The SEC, which began investigating the firm in 2002, also claims that AOL Time Warner used various "elaborate accounting schemes" to boost online ad revenue figures. These included so-called "round trip" transactions, where the firm bought extra adverts for clients including Sun Microsystems and Hewlett-Packard to try to boost figures further. The lawsuits claim that the AOL Time Warner executives "knowingly or recklessly engineered, oversaw and executed a scheme to artificially and materially inflate the company's reported online advertising revenue".

Risk Software Bulks up for Bulging Compliance Market

April 29, 2008 (Financialweek) Coming to grips with enterprise risk is no small feat, though. For assistance, some are turning to a new breed of applications known as governance, risk and compliance software, AMR Research projects spending on GRC applications and services will top $32.1 billion in 2008, up 7.4% from 2007. And AMR analyst John Hagerty expects GRC to grow by another 7% in 2009. The real benefit, though, is that the software makes it easier to cope with new mandates, such as changes to accounting regulations. What's more, deploying GRC programs or platforms in different departments tends to get non-finance staffers thinking about risk management. That's important, given the compliance dangers that lurk in, say, the technology department.

Post-SOX Audit Quality Has Improved

April 28, 2008 (s-ox.com) More than three-quarters of audit committee members who took part in a recent survey commissioned by the Center for Audit Quality (CAQ) rate overall audit quality “very good” or “excellent,” and 82 percent say it has improved in recent years. The Internet survey of 253 audit committee members was conducted between January 7 and February 20, 2008. About 53 percent of the audit committee members agreed that overall audit quality is “very good,” while 25 percent described it as “excellent.” About 87 percent said the risk of inaccuracies in financial statements due to fraud is “not very high,” and 60 percent agreed that the risk declined after the passage of SOX. Audit committee members indicate they believe the risk of fraud and materially inaccurate statements is low due to tightened internal controls and increased external auditor scrutiny. Nearly two-thirds (65 percent) agreed that investors should have more confidence in the markets as a result of the 2002 law.

FASB, IASB Accelerate Convergence Plan

April 28, 2008 (WebCPA) The Financial Accounting Standards Board and the International Accounting Standards Board agreed on a set of proposals to accelerate the 2006 memorandum of understanding on convergence between International Financial Reporting Standards and U.S. generally accepted accounting principles. The two standards boards agreed this week to accelerate their work on issues such as revenue recognition, fair value measurement and consolidation, according to BNA's Daily Tax Report.

Restating: The Career Killer

April 18, 2008 (cfo.com) Companies that restate their earnings have substantially higher rates of involuntary CFO turnover, a new study by four college professors shows. And since the Sarbanes-Oxley Act was passed in 2002, these departing finance chiefs also have faced a tougher time on the job market. The authors surveyed 167 firms that restated earnings downward before Sarbox and 197 after it was enacted. The authors were surprised to find that Sarbox made little difference in the incidence of involuntary turnover. Both before and after the act was passed, a restatement increased the rate of involuntary turnover by four to five times. In the post-Sarbox period, 53 percent of CFOs who left their post after a restatement did so involuntarily. In the case of CFOs who left companies that later restated, only 13 percent of departures were involuntary, about the same rate found in the control group of companies that did not restate.

Security And Governance Voted As Top IT Issues for 2008

April 18, 2008 (cpatechnologyadvisor.com) According to the 19th American Institute of Certified Public Accountants’ Annual Top Technology Initiatives survey, Information Security Management will be the most important initiative affecting IT strategy, investment and implementation in business organizations over the next 12 to 18 months. IT Governance is the second highest priority, reflecting the market’s renewed emphasis on corporate governance and responsibility. The AICPA poll was conducted in the Fall of 2007 together with ISACA, the Institute of Internal Auditors (IIA) and the Information Technology Alliance (ITA). A group of 1,169 AICPA ITMS members and CPA.CITP credential holders, auditors and IT executives participated.

The CEO Poll: Crime and punishment

April 17, 2008 (canadianbusiness.com) According to a web poll conducted by COMPAS Inc., CEOs want tougher sentences for corporate crooks. The 127 CEOs polled were overwhelmingly in favour of tougher sentences for criminals, stronger liability on external auditors, and greater protection for whistleblowers. Yet there was a sizable contingent of business leaders who felt U.S. prosecutors are overzealous in taking down white-collar criminals. Three-quarters of the respondents feel tighter regulations will do very little to protect companies against fraud since dishonest execs will always find ways to cheat the system. Only 53% of respondents shared this sentiment when COMPAS asked the same question in June 2006.

Longer Sentences for White-Collar Offenders

April 10, 2008 (usnews.com) A new paper by Peter Henning, a professor at Wayne State University Law School and a former federal prosecutor, examines the Sarbanes-Oxley Act's impact on sentences for white-collar offenders.

Goodbye GAAP

April 8, 2008 (CFO Magazine) One of the densest thickets of generally accepted accounting principles is revenue recognition. By one tally, more than 160 pieces of authoritative literature relate to how and when companies record revenue. Now, however, U.S. and international accounting authorities are taking a scythe to the rules. They will mow down "broad swaths" of GAAP, says Robert Herz, chairman of the Financial Accounting Standards Board, en route to producing a single set of global accounting guidelines for revenue recognition.

SEC Overhaul Bid by Bush Condemned by SEC Chairmen

April 8 (Bloomberg) -- Three former leaders of the U.S. Securities and Exchange Commission say the Bush administration's proposed overhaul of financial regulation threatens to weaken the agency, a process that may already be under way with help from the SEC itself.

It's Time to Embrace Risk Management

April 7, 2008 (financialweek.com) With the debut of Standard & Poor's new enterprise risk rating for non-financials, execs need to start paying attention. Since the advent of Sarbanes-Oxley, non-financial corporations have faced increasingly strong regulatory and compliance requirements aimed broadly at increasing transparency in their business practices. Risk management has been addressed at times, but usually as an afterthought. All this is about to change.