Section 404 Effective Dates|
Certain companies have received yet another SOX Section 404 extension, thanks to an executive order issued on November 30, 2004, the U.S. Securities and Exchange Commission (SEC).
Accelerated filers with a market capitalization between $75 million and $700 million whose fiscal years close between November 15, 2004 and February 28, 2005 have been granted an extension of 45 days on the internal controls portion of SOX reporting requirements. The extension is only for the management report on internal controls and the auditorís assessment. It does not impact the filing deadline for all other information required in annual reports, including audited financial statements. This deadline is currently 75 days after the end of the fiscal year for accelerated filers.
Companies will be able to include the management internal control assertions and auditorís opinions in an amended Form 10-K within the new 45 day extension window.
According to AMR Research Firm, about 2,600 companies have market caps between $75M and $700M, and about 1,500 of them have fiscal closes during this period. Auditors had estimated that 15% to 30% of them would not complete SOX work by their deadline, and 300 companies had warned the SEC they were likely to miss the deadline for Section 404. SEC chief accountant Donald Nicolaisen said that his agency "is sensitive to resource constraints at accounting firms and at smaller public companies, and is taking this step to facilitate the successful and effective implementation of the [SOX] internal control requirements."
Accelerated filers are generally U.S. companies that have equity market capitalization over $75 million and have filed
at least one annual report with the SEC.
Non accelerated filers have until their first fiscal year ending on or after July 15, 2005, to comply. The original date was April 15, 2005.
In related news, the PCAOB issued a "temporary transitional rule," granting accounting firms similar additional time to comply with the board's Auditing Standard No. 2. This standard requires auditors to attest to the internal control assessments made by management.