Are we overloaded yet? Finding a balance; FASB the Sarbanes-Oxley Act: Nysenasdaq.

• Author: de Mesa Graziano, Mesa
• Position: Corporate Reporting

New rules and regulations just keep on coming, while reporting deadlines get shorter. Financial Executives Research Foundation asks users and preparers about their experiences.

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In the past few years, a slew of new or revised standards and rules have brought changes affecting both companies and investors. And, as Public Company Accounting Oversight Board (PCAOB) Auditing Standard 2 (AS2) implementation and accelerated Securities and Exchange Commission (SEC) filing deadlines loom for 2004, these changes offer only a glimmer of what is yet to come.

Financial Executives Research Foundation (FERF) interviewed individuals of varying, but vested, interests in the financial reporting process, and encountered diverging views. Most agreed that the volume of standards being implemented simultaneously is posing a significant challenge.

"There has been enough in the press, particularly for smaller and middle-market companies, regarding the strain on resources, says Teresa E. Iannaconi, partner in charge of Practice Advisory Services in KPMG LLP's Department of Professional Practice. "I have certainly been aware of significant resources being devoted by large companies, but it is hard to judge whether or not [it] is taking away from the business of business."

Additional reporting and disclosure are time-consuming and absorb resources. However, as Iannaconi notes, the confluence of standards itself is the larger issue. "Perhaps the biggest challenge is that all of this expanded and accelerated reporting is happening at the same time."

"The [current] environment has changed the stakes," says Brett D. Heffes, CFO and treasurer of Minneapolis-based franchisor and financial-services provider Winmark Corp., a public company with a market capitalization of approximately $150 million. "If you have pride in your work product, you want to think through all the issues, given everything that's in the press," he adds.

Heffes notes that preparation of disclosures is relatively straightforward and in many instances may just be a compilation of information already in financial statement footnotes. Instead, the time involved in researching applicability of a standard poses the greater challenge. For his company, he says, "I don't think it's a matter of financial reporting overload. It's a matter of trying to interpret a barrage of new pronouncements in an acceptable timeframe [of] tighter deadlines."

The situation is further complicated with the upcoming AS2 implementation. "The biggest hurdle for 2004 is The Sarbanes-Oxley Act Section 404," says Kenneth R. Trammell, senior vice president and CFO of Lake Forest, Ill.-based Tenneco Automotive. "Though we went through most of our testing last year, our audit firm has given us a testing scope at a much lower level, so we've had to expand our scope."

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