LONDON-- If the United Kingdom and the United States are cousins separated merely by the same language, as is sometimes suggested, then the familial relationship may extend as well to Sarbanes-Oxley rules and regulations.
Sir Howard Davies, a former chairman of the U.K.'s Financial Services Authority and now head of the London School of Economics, says more than a few of the 113 U.K.-based companies with a dual listing on a U.S. stock exchange are considering pulling out of the U.S. bourse.
BP, the British petroleum company, for instance, is spending up to $125 million to comply with SOX. In another example, Wolseley, a heating and plumbing supplier with annual sales of about $17 billion, is spending about $10 million, with 20 full-time staffers at work and KPMG as adviser.
An estimate by the Association of Chartered Certified Accountants, one of three professional institutes covering the accounting profession in the U.K., put the total cost to U.K. companies at $350 million.
Some of the companies are household names in the U.S.: Barclays, British Airways, Bank of Scotland, GlaxoSmithKline and British Telecom.
By the way, the same week we were in London, KPMG reported 6 percent revenue gains for the year, 9 percent raises for partners and a 23 percent revenue jump in the unit handling SOX and Section 404 issues. The rest of the Big Four are probably doing as well or better, according to our U.K. sources.
U.S. Securities and Exchange Chairman William H. Donaldson has offered some relief, telling Davies and others gathered at a symposium at the London School of Economics, "We do have some thoughts on how we can lessen the restrictions." For starters, he said, the SEC is considering pushing back the deadline for foreign issuers from July to as late as December to give them some breathing room. Davies said Donaldson's "statement is to be welcomed." And certainly, the New York exchanges have a lot at stake in the outcome.
U.K. financial managers and accountants are almost as concerned, meanwhile, by the report that maybe 600 U.S. companies face shareholder litigation and higher capital costs after admitting "material weaknesses" in their Section 404 reviews.
THE GLOBAL VIEW FROM LONDON
But relations with the U.S. under Sarbanes-Oxley is just one of the many factors reshaping the global auditing, accounting and financial reporting scene these days.
The European Union, for example, is pushing through a series of measures to standardize and make more transparent financial reports from all businesses in the trading sphere.
Starting this year, E.U.-listed companies must start issuing financial reports under the new International Financial Reporting Standards. The rules hit banks, especially France-based banks, hard. But Vodaphone, because of changes in goodwill rules, could come out ahead. U.S. companies have until 2007 to get into line.
It's a fact of life that the SEC chairman was clearly aware of when, at the London School of Economics, he said, "Many companies outside the U.S., especially in Europe, face additional challenges in the near term that go above and beyond those faced by U.S. companies as European companies adopt International Financial Reporting Standards for the first time in 2005."
From London, it becomes almost painfully clear the global importance of clear, consistent accounting standards. Luckily, on both sides of the Atlantic, and in many other places and tongues, the worldwide accounting profession and financial community are pushing hard to advance the one universal language of business: accounting.
