As expected, the U.S. Securities and Exchange Commission Thursday announced that it will delay an accelerated filing period for annual reports -- a move expected to help big companies transition more easily to year-end reporting requirements under the Sarbanes-Oxley Act.
In 2002, the SEC made a change to the Securities Exchange Act of 1934 that shortened the amount of time companies would have to file their quarterly and annual reports after the end of a fiscal period. The filing requirements for companies with a market capitalization of US$75 million or more shrank from 90 days within the close of a business cycle to 75 days this year. It was scheduled to be cut to 60 days next year.
But sources close to the issue said the SEC was being pressured by big accounting firms to maintain the 75-day filing requirement for one more year to help big companies make their first transition to a year-end Sarbanes-Oxley deadline. Under the SEC proposal issued today, the current deadline for so-called "accelerated filers" would remain at 75 days for annual reports and 40 days for quarterly reports. The accelerated filing phase-in period would resume for reports filed for fiscal years ending on or after Dec. 15, 2005.
SEC registrants have 30 days to comment on the proposal.
Under Section 404 of the Sarbanes-Oxley Act of 2002, large companies must document in their annual reports the financial and IT controls they have in place for fiscal years that end on or after Nov. 15, 2004.
The nation's Big Four accounting firms recently asked the SEC "that they not push it (the filing requirement) to 60 days, at least for the moment, to help companies deal with these current pressures," said Marios Damianides, international president of the Information Systems Audit and Control Association and the Information Technology Governance Institute. Both are in Rolling Meadows, Ill.
For the past few weeks, rumors have been swirling that the SEC might extend the deadline for public companies to meet Section 404 requirements altogether. But sources said those rumors are unfounded and were based on misinterpretations of recent comments made by SEC officials; Section 404 enforcement delays aren't anticipated.
An SEC spokesman declined to comment.
"(The SEC has) already postponed Section 404 deadlines twice. If they keep backing down and do it a third time, people are going to question their credibility," said Tim Welu, CEO of Paisley Consulting Inc., a Cokato, Minn., firm that develops software for managing audits of both IT and financial controls.
"I think they'd only extend the accelerated filing period," said Eric Clarke, internal audit director at Bresler & Reiner, a real estate investment trust. "If they keep extending the deadline for meeting Section 404 requirements, it won't do anything for investor confidence."