FTSE-100 falls foul of Sarbanes-Oxley
More than half the FTSE-100 risks falling foul of the controversial Sarbanes-Oxley Act because they do not produce their accounts quickly enough at the end of the financial year, according to fresh research.
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A report by Parson Consulting found 58% of the FTSE-100 take longer to report than will be required following the introduction of the Sarbanes-Oxley Act. In addition, 30% take longer than the current guideline of 45 days to report their interim results.
Only just over one third of FTSE-100 companies are currently ready for the new SEC reporting guidelines, which will require companies to file their accounts within 35 days of the end of the financial period.
Parson claims that once the new guidelines are in place, companies failing to file within the recommended period could risk becoming less attractive to investors and receive a lower market valuation.
‘The research demonstrates that there is a massive job to be done in order for companies to reduce reporting times,’ said Scott Parker, UK managing director at Parson Consulting. ‘Although there are differences between US company and UK company compliance, businesses will need to take heed and adopt best practice.’
Parker added that the market is already showing evidence that shorter reporting times are indicators of well-run organisations and are reflected in a higher price/earnings ratio.
Companies currently failing to meet reporting deadlines for interim and full-year results could suffer further from the introduction of compulsory quarterly results for listed firms. Although there is a general feeling amongst the business community against a move to quarterlies, there is a suggestion such a requirement could be imposed by the European Union.
In addition Sarbanes-Oxley will require the chief executive and FD to certify results. While this has been standard practice in the UK for some time, the Act adds the need to provide evidence that proper steps have been taken to support certification.
‘The key driver of these changes is to restore confidence in the capital markets through greater transparency of financial information, and this cannot be ignored,’ said Parker.