The top accountant of the Securities and Exchange Commission is worried that companies are overwhelmed with the frantic pace of implementing new accounting requirements.
So Donald Nicolaisen told a group of educators last week that he supports delaying some rules stemming from the 2002 Sarbanes-Oxley Act, the Washington Post reported.
“During the commission's Sarbanes-Oxley rulemaking initiatives, we received many comments focusing on the increased burden that the proposed rules would place on smaller-sized public companies,” Nicolaisen told the American Accounting Association. “I have heard similar concerns expressed about the impact of some of the Financial Accounting Standards Board's proposed standards, such as its exposure draft on accounting for stock options.”
Nicolaisen has already said he supports giving companies another year to gear up for final rule on expensing stock options. FASB had set an end-of-year expectation for completion of the rule, which needs SEC approval.
One much-discussed SOX requirement involves requiring companies to review the effectiveness of their internal controls over financial reporting. Nicolaisen said those reforms are so important that it would help company managers and their auditors to delay other rules “at least temporarily.”
Auditors will have to move fast to get the internal controls rules in place. Large companies must provide the management's assessment of the effectiveness of internal control in financial statements for fiscal years ended after Nov. 15 of this year. Smaller companies will have a cut-off date of July 15, 2005.
“It is absolutely critical that we get the internal control requirements right,” he said.
Which SEC initiatives might be delayed? Nicolaisen didn't say.
However, companies have asked SEC officials to delay a rule that would accelerate the deadline for public companies to file annual reports with the agency. Rather than filing annual reports within 75 days of the end of their fiscal year, the new rule would put in place a 60-day deadline. The agency is considering the request.