SEC demands rules-based disclosures

US financial watchdog the SEC has begun sending detailed compliance demands
to UK companies with US listings, in an apparent attempt to put pressure on
companies filing under IFRS to adopt a US accounting approach.

The SEC has sent the
so-called ‘comment letters’, which interrogate companies’ financial reports and
ask for greater detail, to UK corporates that filed using international
financial reporting standards

The letters, which are understood to have been sent to AstraZeneca and Smith
& Nephew, among others, demand extensive detail on company filings.

Senior figures said this week that the moves appeared to be an attempt to
force companies to file under a rules-based, rather than a principles-based,

Jon Symonds, AstraZeneca’s chief financial officer, last week lashed out at
the US body. He warned delegates at a Euromoney conference on IFRS that the SEC
could become the sole arbiter of financial standards.

Kathryn Cearns, consultant accountant at Herbert Smith, saw one such letter.
‘The letter that I did see was extremely detailed in what it was asking for,’
she said.

Cearns said that financial officers were concerned about how far the SEC was
going in laying down the law on how IFRS should be applied.

‘The worry of the FDs is that it doesn’t look like the SEC or its staff are
attempting to take the principles-based approach,’ Cearns said. ‘They seem more
concerned with the detail of the standards, even though these are
principle-based rules that have to be applied in that way.’

Other UK companies thought to have received comment letters include
engineering group Tomkins and medical device manufacturer Smith & Nephew.

SEC spokesman John Heine refused to talk about the letters. ‘We don’t comment
on specific filers or review their filings publicly,’ Heine said.

Related reading

Fiona Westwood of Smith and Williamson.