As expected, the Securities and Exchange Commission will likely grant smaller public companies and most foreign private issuers an extension on having to comply with the internal controls provisions of the Sarbanes-Oxley Act.
The initial reporting date for small public companies will be moved back six months, to fiscal years ending on, or after, Dec. 15, 2007, and full compliance won't be required until the company's first annual report for a fiscal year ending on, or after, Dec. 15, 2008.
Many foreign companies will get a full year's reprieve, meaning that an auditor won't have to attest to internal controls in their annual reports until fiscal years ending on, or after, July 15, 2007.
SEC Chairman Christopher Cox said that the actions were a show of the agency's efforts to minimize the burdens of Section 404 on both groups.
"By offering further relief for smaller companies and most foreign issuers, [these] actions will allow time for the commission and the [Public Company Accounting Oversight Board] to redesign Section 404 implementation in a way that is efficient and cost effective for investors," Cox said, in a statement. The SEC said that both groups are continuing to work on tweaking the rules appropriately.
The commission also proposed that new public companies be allowed able to take advantage of transition relief. A ny company that becomes public, or otherwise becomes subject to the Exchange Act reporting requirements -- including a foreign private issuer listing on a U.S. exchange for the first time -- won't be required to provide a management assessment or an auditor attestation report of its internal controls until it has already filed one annual report with the SEC.
The new company and smaller public company proposals will be published soon in the Federal Register and will be open for comment for 30 days. Because the foreign company extension is a final commission action, the measure will be effective as soon as it is published in the Federal Register.
More information on the proposals, as well as how to submit comments, is available at www.sec.gov.
Previously on WebCPA:
COSO Rolls Out Guidance for Smaller Businesses (July 13, 2006)
SEC Says SOX Is Here to Stay, for Everyone (May 16, 2006)
PCAOB Announces Plan to Improve Internal Control Rules (May 18, 2006)
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