Faced with a flurry of complaints about burdensome new rules, the U.S. Securities and Exchange Commission Tuesday postponed a deadline for some companies to submit reports on their "internal controls."
Under the SEC's action, some companies will have an additional 45 days to file the reports with the commission.
The delay involves a post-Enron rule mandated by Congress that requires company managers to explain in annual reports how they ensure that their financial houses are in order. Corporate auditors have to attach their own comments, as well.
The rule — spelled out in Section 404 of 2002's Sarbanes-Oxley corporate governance and accounting reforms — has created a cottage industry in so-called "404" compliance and has caused many companies to complain about its cost.
Under SEC rules, companies have to submit annual reports to the SEC within a certain period after their fiscal years end. That time period is 75 days this year.
The internal controls report postponement applies to companies with fiscal years ending between Nov. 15, 2004 and Feb. 28, 2005, and with public equity float between $75 million and $700 million as of mid-2004, the SEC said in a statement.
Eligible companies will now have 45 days after the expiration of the 75-day reporting window to amend their annual reports with the required management report on internal controls, as well as the auditor's comment, the SEC said.
"This exemption will encourage companies to file important information for investors, including audited financial statements, on a timely basis, while providing an appropriate accommodation for internal control reports," said SEC Corporation Finance Director Alan Beller in a statement.
The Public Company Accounting Oversight Board, which regulates corporate auditors, also said it has approved a temporary rule delaying Section 404 compliance for auditors.
