US-quoted companies urge reconciliation shift

Businesses quoted on the US Stock Exchange are pushing for a key IFRS reform
to be extended, which could benefit almost 700 companies.

The Securities and Exchange
Commission has been mulling over the possibility of allowing foreign private
issuers to submit their accounts without having to go through the onerous
process of reconciling them to US GAAP.

During the past few months, the SEC has asked for feedback from companies
regarding the issue, opening the floodgates for criticism of the reconciliation
millstone, which was described by respondents as ‘highly technical, not widely
understood and typically not available on a sufficiently timely basis to be
useful’.

Many commentators wanted the SEC to allow financial statements prepared under
local versions of IFRS. There are about 70 more overseas companies that file
under ‘jurisdictional’ versions of IFRS.

The SEC said that it would ‘be in a similar position’ to receive the break if
it could match up its financial statements to the reporting standards endorsed
by the IASB.

Around 100 issuers from Israel and 500 from Canada have also announced moves
to IFRS reporting, which gives an indication of how far-reaching the
reconciliation withdrawal could be.

Currently, there are 110 reporting foreign private issuers, such as Vodafone,
oil giant BP and HSBC, that provide financial statements adhering to the IASB’s
version of IFRS. At present, only these overseas companies are in line to have
the reconciliation millstone lifted, but those polled wanted the moves to go
further.

The prospect of allowing financial statements prepared under GAAP, if
reconciled to the IASB’s version of IFRS, was suggested as well. This may be a
step too far for the SEC, which is still labouring in its convergence efforts.

The SEC also said that some stakeholders remained cautious, believing that
the time was not yet ripe for accepting financial statements prepared using IFRS
without a US GAAP reconciliation.

The US market watchdog added: ‘For the proposal to remove the reconciliation
process we have begun the process of evaluating the important issues raised.
Given the increasing globalisation of capital markets, it is imperative that the
commission be vigilant in keeping our regulatory standards up-to-date.’

COMPANY REPORTS

PwC to investigate £124m forex deal loss

Singapore-based oil rig builder SembCorp Marine has appointed
PricewaterhouseCoopers to investigate foreign exchange deals, which have led to
losses of up to $S370m (£124m). Earlier this week, SembCorp Marine revealed
former finance director Wee Sing Guan had generated those losses when he
allegedly entered into various unauthorised foreign exchange transactions for
the account of one of its wholly-owned subsidiaries, Jurong Shipyard. SembCorp
Marine has appointed Maureen Leong interim FD. She will assist in the company’s
finance, treasury and tax matters for at least six months, until a suitable
candidate is found.

Fraud charge for ‘bulletproof’ executive

The chief executive of a company entrusted with providing the US military
with protective kit is facing charges of ‘pervasive accounting fraud’ levelled
by the SEC. The markets watchdog filed securities fraud charges against David H
Brooks, the former CEO of DHB Industries, a major supplier of body armour. The
SEC believed that Brooks, with the assistance of DHB’s former chief financial
officer Dawn M Schlegel, manipulated the company’s gross profit margin and net
income by overstating inventory values, falsifying journal entries, and failing
to include appropriate charges for obsolete inventory.

According to the SEC, Brooks used company credit cards and cheques to pay
millions of dollars in personal expenses.

NatWest three near plea bargain

The NatWest three – UK bankers accused of a fraud linked to the Enron
collapse – are believed to be a fortnight away from securing a plea bargain with
US prosecutors. If the deal is secured, it will see some charges dropped in
return for the bankers admitting others, reports said. The three bankers, Giles
Murphy, Gary Mulgrew and David Bermingham, have always protested their
innocence, but failed to avoid extradition to the US. A ‘best-case scenario’
plea bargain could see the bankers serve as little as a year.