Financial Reporting

Community News

Scrushy Attorneys to Seek Repeal of Sarbanes-Oxley

Richard Scrushy, founder and ousted CEO of HealthSouth, may be the first corporate executive to be charged under the new Sarbanes-Oxley Act corporate governance rules, but he plans to challenge the act itself.In a move Justice Department attorneys say they expected, Scrushy’s attorneys said yesterday they will try to overturn Sarbanes-Oxley, which was Congress’s response to massive accounting fraud at Enron, WorldCom and HealthSouth, the country’s largest operator of rehabilitation clinics.Sarbanes-Oxley requires top corporate officers to sign off on their company’s financial sta

SEC Addresses Late Trading, Market Timing and Related Abuses

At an open meeting today the Securities and Exchange Commission took action on three measures to address late trading, market timing and related abuses in the mutual fund industry.The Commission voted to propose a rule requiring that fund orders be received by 4:00 p.m.
Practice

IMA Launches Sarbanes-Oxley Knowledge Network

The Institute of Management Accountants (IMA) announced this week the launch of its Sarbanes-Oxley Knowledge Network http://www.imaknowledge.org/sox. (Note: Registration is required.)The Network is a new and first-of-its-kind Web-based collaborative learning tool designed to aid financial professionals in understanding and implementing the Sarbanes-Oxley Act of 2002 (the SOX Act).
A&A

FASB Close to New Pension Reporting Rule

Companies will be required to report their pension assets and investment strategies under a new rule being considered by the Financial Accounting Standards Board (FASB).One major change is that companies will be required to describe their pension holdings — reporting on the proportion of stocks, bonds, real estate, private equity and other investments, the FASB decided last Wednesday.
Community News

H&R Block Posts Strong Second Quarter Earnings

H&R Block Inc. surprised industry analysts by posting stronger-than-expected earnings during what is usually an off-peak quarter for the tax preparer. For the first time, Block posted earnings growth in the second quarter of its fiscal year, chalking the upswing to growth in its mortgage business as well as a booming tax season in Australia. The quarter was so good, the company raised its earnings projections for the entire year. "The company has never previously reported a profitable second quarter," H&R Block noted in a prepared statement.
Community News

Report: Execs, Lawyers, Accountants to Blame for Enron’s Fall

Enron Corp.’s former Chief Executive Ken Lay, its lawyers and accountants should be held liable for millions of dollars in claims against the fallen energy giant, according to a bankruptcy court examiner’s report filed last week.Lay could be liable for $94 million for taking a loan from the company that he paid back illegally with Enron shares, according to Reuters’ account of the report.

Freddie Mac Outlines Details of Earnings Manipulation

Freddie Mac, the nation’s No. 2 mortgage finance company, revealed details on Friday about overstating earnings by almost $1 billion in 2001 and understating profits for 2002, 2000 and earlier periods by more than $6 billion.It was the first time Freddie Mac released details of the accounting scandal that shocked investors in January when the company announced that it would have to restate earnings. The cumulative effect of the company’s financial misdeeds and accounting errors was an understatement of earnings by $5 billion.
A&A

SEC Adopts Stricter Rules to Improve Disclosure to Investors

At an open meeting last week the Securities and Exchange Commission (SEC) adopted rules that will improve disclosure to investors regarding the nominating committee processes of public companies and the ways by which security holders may communicate with directors at the companies in which they invest. The disclosure requirements adopted will enhance significantly the transparency of the nominations and communications processes of public companies and are the next step in the implementation of the recommendations in the Staff Report.

Bill Would Require Option Expensing, But Only for Top Execs

A bipartisan group of senators is pushing legislation that would require only the top five executives at a company to expense their stock options.Sponsors of the bill say it is a compromise they hope will persuade the Financial Accounting Standards Board (FASB) to drop its plan to require companies to list all options as expenses, Reuters reported.Wyoming Republican Sen. Mike Enzi, one of the bill’s five sponsors, said FASB is not listening to protests from lawmakers, business people and others that requiring expensing of broad-based options programs could hurt U.S.

Audit Committee Disputes Huge Fees in WorldCom Bankruptcy

An audit report of professional fees in WorldCom Inc.’s bankruptcy case was filed in federal court last week, shedding light on the high cost of high stakes bankruptcy proceedings.WorldCom, which won a federal judge’s approval for its reorganization plan earlier this month, has piled up fees at a rate of $10 million a month, according to The Washington Post.WorldCom is paying its own bankruptcy law firm as much as $3 million a month, but it is also required to pay for its creditors' lawyers and financial advisers. WorldCom has paid $150 million in fees during the past year.
A&A

Trend Setters, Company to Format & Release Own Earnings in XBRL

Bowne & Co., Inc., the world's largest financial printer and leading EDGAR filer, today announced it will participate in a major industry financial reporting demonstration utilizing Extensible Business Reporting Language (XBRL).

Foreign Registrants Face Unprecedented Shareholder Class Actions

According to PricewaterhouseCoopers research, 13 foreign companies have been sued in shareholder class actions through November 3, 2003.In 2002, PricewaterhouseCoopers Foreign Securities Litigation Study reported an unprecedented 22 foreign issuers who were named in securities class actions, an increase of 47 percent over the 15 cases filed in 2001. (Note: 2001 numbers exclude "IPO Laddering" cases).PricewaterhouseCoopers' research shows that since the start of 2002, foreign issuers have agreed to pay a total of approximately $700 million to settle shareholder class actions in the U.S.

SEC Approves NASDAQ and NYSE Corporate Governance Rules

The Securities and Exchange Commission has approved new rules proposed and adopted by the New York Stock Exchange and the NASDAQ Stock Market requiring widespread strengthening of corporate governance standards for listed companies.SEC Chairman William Donaldson said, "These rule changes are at the core of a broad movement by our markets to enhance the corporate governance practices of the companies traded on them and I congratulate the NYSE and the NASD for their efforts.
Tax

Third Quarter Profits: Real Growth or More Shell Games?

Despite the ongoing scandals surrounding questionable accounting practices, companies are still looking for ways to paint a better picture of their financial condition, with fluctuating tax rates appearing to be their best bet. The Associated Press reported that Coca-Cola’s third quarter tax rate was 18.4 percent, down from the projected 24 percent. The company expects to end the year with a 22 percent rate.
Technology

IT Vendors Seek Share of Sarbanes-Oxley Pie

The 2002 Sarbanes-Oxley Act has generated a cottage industry around the daunting task of implementing the accounting reform legislation. SAP, Oracle and IBM are among the technology providers rolling out products and services to help aid businesses in their attempts to put Sarbanes-Oxley to work. The law was passed last year after a series of corporate scandals led to the downfall of Enron Corp., as well as the venerable accounting firm, Arthur Andersen.
Practice Management

Fannie Mae Issues $1.2 Billion Revision to 3rd Quarter Statement

Fannie Mae, the company that guarantees most of America’s mortgages, revealed a $1.2 billion mistake on its third-quarter earnings statement, which it revised on Wednesday.The revision took total accumulated other comprehensive income to minus $15.228 billion from its original statement of minus $16.364 billion and total assets shifted from $1.018 trillion to $1.019 trillion. Reuters reported that the revisions will only impact balance sheet items and would not affect the income statement.

IBM Offers New Services to Help Companies Meet Federal Deadlines

Only one in 10 CFOs and financial executives surveyed by IBM Consulting Services believe their company’s internal controls comply with Section 404 of the Sarbanes-Oxley Act today — despite a compliance deadline only eight months away.The survey results, announced Wednesday, revealed that top executives from some of the largest U.S.

Study: Audit Firms Still Bend Rules to Benefit Big Clients

A study by Vanderbilt University researchers has found that audit firms are still likely to produce inaccurate audit opinions to benefit a big client — as long as company officials think they can get away with it."Our study demonstrates that audit firms may lie to keep a profitable audit client if the expected benefits of keeping the client happy outweigh the expected costs of an audit failure if the firm gets caught," said Debra Jeter, co-author of the study and an associate professor of accounting at the Owen Graduate School of Management at Vanderbilt.However, the report also sugges
Community News

Former Rite Aid Counsel First to be Convicted After Scandals

Franklin C. Brown, former Rite Aid chief counsel, was convicted Friday after a jury found him guilty of conspiracy and other charges, the first jury verdict in the wake of corporate scandals. Brown was convicted of conspiracy to inflate earnings, several obstruction charges, witness tampering and five charges of lying to SEC investigators, in a case that came to light a year before Enron erupted. He was acquitted of wire fraud and is free until sentencing at a date to be named later."We're all satisfied. This jury did what one hopes juries will do.
A&A

FASB Defers Date For Accounting Guidance on Variable Interest Entities

At its Board meeting on October 8, the FASB decided to defer to the fourth quarter from the third quarter the implementation date for Interpretation No. 46, Consolidation of Variable Interest Entities, issued earlier this year. This deferral only applies to variable interest entities that existed prior to February 1, 2003.

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