500 Foreign Firms Still use U.S. GAAP U.S. Regulatory Filings

Good article by Emily Chasan of the WSJ.


The Big Number: 500

That’s the approximate number of foreign firms that use U.S. accounting standards in U.S. regulatory filings.

Some foreign companies that file financial reports with U.S. securities regulators are having trouble freeing themselves from U.S. accounting standards.

Five years ago the Securities and Exchange Commission voted to let U.S.-listed foreign companies that use International Financial Reporting Standards stop having to reconcile their financial statements with U.S. Generally Accepted Accounting Principles. But about 500 companies, or roughly half of the 1,000 foreign companies listed on a U.S. exchange, still submit their filings using the U.S. standards.

Some companies still must reconcile their home country’s accounting rules with U.S. GAAP, “but that number is shrinking in favor of companies that switch” to IFRS, Craig Olinger, deputy chief accountant in the SEC’s Division of Corporation Finance, said recently at a Financial Executives International conference.

More than 100 countries currently use IFRS. European companies, which have been using those standards since 2005, are the largest group using international rules for U.S. filings. Canada, which accounts for the biggest number of foreign SEC-registered companies, should soon have more companies using international rules for their U.S. filings after switching to IFRS last year. Some of the 340 Canadian companies that file with the SEC still reconcile their results to U.S. GAAP, Mr. Olinger said.

U.S. regulators still haven’t decided whether U.S. companies should be able to report using IFRS, and the successor to SEC Chairman Mary Schapiro will play a large role in that discussion. A widely anticipated study by the SEC’s staff earlier this year didn’t make any formal recommendations on the matter. Mr. Olinger said the SEC staff stays up to speed on trends in IFRS and performs reviews of filings in international standards at the same level that it inspects those done in U.S. GAAP

Fix for IFRS XBRL Taxonomy Exposed

Both the U.S. GAAP and IFRS XBRL taxonomies have been revised and exposed for comment.

For those not familiar with XBRL, it is an open-source HTML-like language for tagging financial statements. Proponents claim that XBRL makes it easier for investors and analysts to compare financial results across companies and industries. XBRL is now mandated by the SEC for public companies to use in their financial filings. XBRL tags let users of financial statements electronically search for, assemble, and process data so the information can be accessed and analyzed by investors, analysts, journalists and regulators.

The 2012 U.S. GAAP Financial Reporting Taxonomy is expected to be finalized and published in early 2012. The proposed 2012 U.S. GAAP taxonomy and instructions on how to submit comments are available on FASB’s XBRL page.

As for the IFRS taxonomy, the IFRS Foundation has revised it taxonomy in response to regulators and preparers who wanted more extensions (additional sub-accounts) to the full IFRS XBRL taxonomy.

The IFRS XBRL taxonomy is used to help those filing IFRS financial statements electronically to tag the information with identification tags, also known as “concepts.” Currently, the IFRS taxonomy includes all of the core concepts included in IFRS as issued by the IASB. However, preparers often need to provide more detailed financial information than is reflected by the core IFRS concepts.

To ensure that those creating and using electronic filings do not need to create their own extensions to the IFRS taxonomy, the IFRS Foundation has created an “extension taxonomy” by analyzing and drawing from common practice. For instance, although IFRS requires the disclosure of an analysis of expenses, IFRS does not include a prescriptive listing of all of the possible categories of expenses. The common-practice taxonomy includes concepts for the most commonly used types of expenses, such as “sales and marketing.”

The interim taxonomy released on Thursday completes the first part of a project to address this issue, by providing about 350 extensions for the most common concepts used in the financial statements.

The common practice concepts are in line with IFRS requirements and will help to alleviate the burden on preparers and to increase the comparability between financial statements in accordance with IFRS that are electronically submitted.

XBRL and IFRS Mess

As a result of a series of missteps and lack of coordination, companies that file financial statements in the United States following IFRS may be getting a break on their first XBRL filing.

The SEC have acknowledged that it would be impossible for foreign private issuers, filing with the SEC following IFRS, to file in XBRL, because the SEC has yet to approve the XBRL taxonomy that IFRS filers should follow. Foreign private issuers (“FPI”) filing quarterly “voluntary” 10-Q filings are the first group of the third and final wave of companies coming under SEC rules to file in the XBRL for the first time.

For example a calendar year FPI in this group files its 30 June 2011 Form 10-Q on its Monday 10 August 2011 due date. The company would have until Tuesday 8 September 2011 to file its first XBRL exhibit under Form 10-Q/A. No grace period would be available for its 30 September 2011 Form 10-Q. For a FPI not filing voluntarily on domestic forms, its annual report on Form 20-F or Form 40-F for its year ended on or after 15 June 2011 will be the first SEC report required to include XBRL data. So a calendar year filer in this group would file its annual financial statements in XBRL format by its filing deadline in 2012.

To provide financial statements in XBRL according to SEC's rules, companies must follow a taxonomy approved by the SEC. A taxonomy is a list of computer-readable tags in XBRL that allows companies to tag the thousands of bits of financial data that are included in financial statements and footnote disclosures. On March 25, the IFRS Foundation finalized a 2011 IFRS taxonomy that would be followed by IFRS issuers to file in XBRL. The SEC has not yet approved that taxonomy, and hasn't said when it expects to do so. An SEC spokesman said the IFRS Foundation is still working on the taxonomy. Previously taxonomies took about five weeks for SEC approval.

The SEC has relaxed its rules for filings stating: “We are of the view that foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB are not required to submit to the Commission and post on their corporate websites, if any, Interactive Data Files until the Commission specifies on its website a taxonomy for use by such foreign private issuers in preparing their Interactive Data Files,” Cross and Kroeker wrote. The letter gives no indication, however, of when the SEC expects to approve the IFRS taxonomy and therefore how that might impact the date for XBRL filing requirements.

SEC to Hold Public Seminar on XBRL

SEC to Hold Public Seminar on New Interactive Data Reporting Requirements

The Securities and Exchange Commission will conduct a public seminar on June 10 from noon to 3 p.m. ET to help companies and preparers comply with new rules that require financial reports to be filed using interactive data (XBRL).

The Commission staff will present information about the technology requirements for complying with the rules and will also provide an overview of the tools and information provided by the Commission to assist with compliance. The seminar will also cover frequently asked questions about the rules and technology requirements.

In adopting the final rule, the Commission noted that interactive data has the potential to increase the speed, accuracy, and usability of financial disclosure and eventually reduce costs.
This event will be held in the auditorium at the SEC's headquarters at 100 F Street, N.E., in Washington, D.C. The seminar will be open to the public with seating on a first-come, first-served basis. The seminar also will be webcast via the SEC Web site.

To ensure the seminar is responsive to the needs of companies and preparers, the Commission staff is seeking suggested questions and topics to be discussed at the seminar. Interested parties should email their questions to Ask-OID@sec.gov and include in the subject line "Public Education Seminar."

For additional information about the seminar, contact Ask-OID@sec.gov

XBRL Readiness Lags Behind

According to a survey of 500 public companies that the SEC requires to begin filing their financials in XBRL format in June, 340 companies, about 70% have made the conversion. The survey was done by the nonprofit standards group XBRL US.

Advocates of XBRL say that the requirements will result in more accessible SEC reports that are easier to analyze, with enhanced capability to quickly compare companies’ results. Companies will use XML data tags (“taxonomies”) to file their financial information on EDGAR. Companies currently file their financial reports in text or HTML.

XBRL will be phased in over two years, with companies having more than $5 billion in shares held by the public required to file using XBRL starting with their June 2009 quarterly reports. A further 1,800 other large filers will be required to file in XBRL in June 2010, and all other publicly traded companies and foreign private issuers will be required to comply starting in June 2011.

XBRL US released its 2009 US GAAP Taxonomy for XBRL in April this year.