Compliance Week: Lease Accounting Problems Dominate Latest Internal Controls Weaknesses.

BOSTON -- Fifty-eight companies disclosed material weaknesses in their internal control over financial reporting in April, and many of the disclosures were related to lease accounting issues brought to the forefront recently by the SEC. That's according to the latest edition of Compliance Week, which reported that lease accounting errors comprised 22.5 percent of the month's weaknesses. In March, less than 10 percent of the weakness disclosures were related to lease accounting issues.

In its Tuesday, May 10, 2005, edition, Compliance Week noted that many of the companies making lease-related disclosures claimed they were being made in the wake of a letter written by the Securities and Exchange Commission's chief accountant to a professional accounting group. The letter, written itself after a wave of restatements to correct lease-related accounting errors, reiterated the rules.

According to an article published by Compliance Week at the time, the SEC's Donald Nicolaisen focused his letter on three issues related to lease accounting: depreciation of the costs to improve leased property, how to recognize periods of free or reduced rent, and how to account for landlord incentives to make improvements. Nicolaisen addressed the letter to Robert Keuppers, chairman of the Center for Public Company Audit Firms, which is an arm of the American Institute of Certified Public Accountants.

Complete details, including a list of all the internal control weakness disclosures in April, are available to the media by contacting [e-mail].

Also in this week's edition of Compliance Week is an analysis of Section 16(a) beneficial ownership reporting compliance.

Two years ago, the SEC adopted rules mandating the electronic filing and Web site posting of "beneficial ownership reports" filed by officers, directors and principal security holders. Promulgated by Section 403 of The Sarbanes-Oxley Act, the rules require that most transactions reported on Form 4 be filed within two business days of the reportable event. And companies must include in their proxy statements information on those who filed late trades. This week, Compliance Week began publishing a spreadsheet that tracks those proxy disclosures.

According to the data, 47 percent of more than 2,000 DEF 14A filings reviewed included at least one "exception" who filed a late report.

The complete report, in Microsoft Excel spreadsheet format, is available to the media by contacting [e-mail].

The latest edition of Compliance Week also includes:

--The latest Internal Control Report Scorecard, which shows that the "failure" rate issued to companies by their auditors regarding Section 404 of Sarbanes-Oxley has inched up near 10 percent;

--A look at CEO tax certification, which recently surfaced in a highway funding bill;

--Details on an NYSE working group that is examining the issue of proxy voting;

--Strategies that companies are employing to reduce stock option expenses;

--The results of a survey that show more companies are offering less earnings guidance;

--A look at recent "severance" packages at Toys R Us;

--How hedge funds are flexing their muscles and exacting governance changes.

And as usual, Compliance Week makes available updated lists and spreadsheets of the latest auditor changes, class action filings, D&O announcements, governance policy changes, SEC investigations, financial restatements, and filing delays.

Members of the media can request a copy of all articles by sending an email to [e-mail], or by calling Compliance Week at [phone].

ABOUT COMPLIANCE WEEK

Compliance Week is a newsletter on corporate governance and compliance that reaches over 40,000 financial and legal executives at U.S. public companies. Anchored by the columns and insights of numerous governance experts, including former SEC Chairman Harvey Pitt, the newsletter is complemented by a special print edition delivered monthly to all subscribers.