Accounting standards

The chief financial officer of a popular steakhouse chain has called it quits, citing the negative regulatory environment, including what he referred to as "lunacy over lease accounting."

BearingPoint, the consultancy formerly tied to accounting firm KPMG, disclosed that the Securities and Exchange Commission has launched an informal probe into the company's accounting practices.

The Securities and Exchange Commission's Office of the Chief Accountant has selected two professional accounting fellows for two-year terms beginning in June 2005.

Despite dire predictions by critics of the Sarbanes-Oxley Act that the accounting reform law would freeze smaller CPA firms out of the audit business, just the opposite appears to be happening, Public Company Accounting Oversight Board Chairman William J. McDonough told Congress.

Officials from the Securities and Exchange Commission and the European Union Commission have reached an agreement on a "roadmap" toward equivalence between international and U.S. accounting rules.

The Government Accountability Office's quality assurance system has received a clean audit opinion from an international peer review team.

The Coca-Cola Co. announced a settlement with the Securities and Exchange Commission related to allegations that the company used a channel-stuffing practice known as "gallon pushing" to meet earnings expectations.

The Professional Ethics Executive Committee of the American Institute of CPAs has proposed in an exposure draft a new ethics interpretation of rules to determine whether financial interests held by a company's external auditor impair independence.

Big Four firm KPMG LLP has agreed to pay more than $22 million to settle charges brought against it by the Securities and Exchange Commission in connection with its audits of Xerox Corp. from 1997 through 2000.

President Bush has signed into law H.R. 1134, exempting qualified disaster mitigation payments from tax.

In a resounding salvo aimed at pending proposals on business combinations and consolidated financial statements from the Financial Accounting Standards Board, two major financial associations - Financial Executives International and the Institute of Management Accountants - have roundly criticized not only the board's approach to those proposals, but also a broad spectrum of related issues.

London - The trustees of the International Accounting Standards Committee Foundation have begun deliberations on an increasingly political review of its constitution.

Audits have gotten more complicated, and that means more auditors will be using more specialists. But what qualifications does a specialist need to be entrusted with a role in an audit?

Securities and Exchange Commission enforcement director Stephen M. Cutler, whose tenure included investigations of some of the largest financial reporting failures in the nation's history, is leaving the commission next month to return to the private sector, the agency said. The agency has not yet named a successor.

Amid an investigation into its disclosures and accounting practices, Raytheon Co. placed its chief financial officer on leave at the same time that it announced that it had submitted a settlement offer to the Securities and Exchange Commission and settled a shareholder lawsuit.

The Securities and Exchange Commission voted to delay the effective date of a Financial Accounting Standards Board rule that requires companies to treat employee stock options as expenses.

The cost of compliance associated with Section 404 of the Sarbanes-Oxley Act are expected to drop significantly for some companies, according to a report commissioned by the Big Four audit firms.

The Securities and Exchange Commission is reportedly expected to change the effective date for new stock option accounting rules that will require companies to include employee stock-option compensation as an expense on their earnings reports, giving most U.S. companies a six-month reprieve.

Maintaining the morale of employees charged with ensuring Sarbanes-Oxley compliance in their companies remains the largest challenge to 404 compliance, according to a just-released survey. Nearly half of the 200 executives participating in the 2005 Financial Executive Report, conducted by Oversight Systems, indicated that employee morale was the largest issue in SOX 404 compliance, while reducing internal and external costs ranked as the second-most-frequently cited challenge to ongoing compliance. "Obviously, complying with Section 404 of Sarbanes-Oxley has been extremely expensive," said Joseph V. Carcello, co-founder and director of research for the University of Tennessee's Corporate Governance Center and an advisor to Oversight Systems. "However, stronger controls lead to real benefits in the form of eliminating waste, eliminating abuse, and [producing] better information for improved decision-making." To reduce the burden on employees and compliance costs, 60 percent of financial executives surveyed said that they are implementing software that automates the manual processes required for compliance. Other survey findings included: o 49 percent said that SOX compliance resulted in reduced risk of fraud and errors; o 48 percent indicated that they now have more efficient financial operations; and, o 31 percent said that error rates have declined. The survey is available at www.oversightsystems.com/survey.html.

The Governmental Accounting Standards Board has released Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports that Contain Basic Financial Statements, a paper providing guidelines for presenting financial disclosure information. The methods include recognition in basic financial statements, disclosure notes to financial statements, and presenting supplementary information. GASB said that the definitions and criteria in Statement No. 3 should aid the board or the preparers of financial reports in determining the best methods to use to communicate information. The concept statement can be ordered through GASB's order department at (800) 748-0659, or via its Web site at www.gasb.org.