|
|
Thursday, February 05, 2004
|
|
Visa Airs Olympics Teaser in Super Bowl Commercial
|
|
Visa U.S.A. used its Super Bowl advertisement slot to kick off its campaign for the Summer Olympics, the largest global sponsorship of its affiliate Visa International.
The 30-second spot aired during the football game`s second quarter Sunday. That was well ahead of the Athens Games in August, but Becky Saeger, Visa U.S.A.`s executive vice president of brand marketing, called the NFL contest an ideal event to trumpet the Olympics sponsorship.
The San Francisco company tracks the efficiency of its advertising quarterly, correlating the campaigns with card use. Consumers tend to use their cards more when they are aware that the brand is also sponsoring the Olympics or the NFL, Ms. Saeger said.
Visa International has been an Olympics sponsor since 1986, with Visa U.S.A. acting as a separate sponsor of various women`s teams of inaugural sports such as hockey in Nagano, Japan, in 1998, and bobsled in Salt Lake City in 2002. Visa`s Super Bowl commercial, developed by BBDO in New York, featured the U.S. women`s volleyball team.
Visa has exclusive rights during the Games. No other payment card brand can be advertised during the Olympics broadcasts, and none can be used to pay for any Olympics merchandise. "That`s a little more robust than just saying you`re an official sponsor," Ms. Saeger said.
As for other joint marketing opportunities this year, Ms. Saeger said that Visa would stick for now with its current roster of partners, which includes Walt Disney Co.
Elise Neils, one of the principal owners of Absolute Brand LLC in Milwaukee, said large global sponsorships are often worth the hefty price.
"Even if it doesn`t induce the audience to use the Visa card and increase revenues ... visibility, which is more difficult to measure" ultimately pays for the cost of the campaign, Ms. Neils said.
In late January, Visa U.S.A. announced that it had renewed its sponsorship with the NFL to 2010, which would represent a 15-year partnership. In the past the league gave Visa exclusive rights similar to its Olympics arrangement, but not anymore.
This year the league allowed individual teams to cut their own sponsorship deals, and MasterCard took advantage. The Purchase, N.Y., company promptly signed 16 teams, including the Super Bowl champion New England Patriots, the New York Giants, and the Dallas Cowboys. It also bought a Super Bowl ad.
Copyright 2004 Thomson Media Inc. All Rights Reserved. www.thomsonmedia.com www.americanbanker.com
COPYRIGHT 2004 Gale Group
For more information about the value of your brand, contact info@absolutebrand.com.
|
|
Tuesday, November 11, 2003
|
|
Listen to the bean counters harmonising
|
|
In 1998, as president of the Society of CPAs, David Boymal fought to keep the setting of Australian accounting standards under the control of the two main accounting bodies.
Business groups, led by the Business Council of Australia, had lobbied for a government takeover because, they argued, the bean counters had lost the plot and accounting standards had become too theoretical - out of touch with the real business world.
The Treasurer, Peter Costello, agreed, and Boymal lost the battle. The Financial Reporting Council was set up and the AASB was made, in effect, a government body under the direct control of the Treasurer.
And then last week, in a beautifully circular piece of irony, Peter Costello appointed David Boymal chairman of AASB.
The almost universal reaction has been: good choice, but why did it take so long? The previous chairman, Keith Alfredson, left in May. Boymal applied as soon as the ads appeared and retired from his old job, national director of accounting standards and audit at Ernst & Young, in June - since which time he has been gardening.
Perhaps Peter Costello spent six months trying to avoid appointing David Boymal because of what happened in 1998.
In fact, there is some scuttlebutt that Costello approached Jillian Segal, former commissioner of the Australian Securities and Investments Commission, to take the job on, but when some of the accounting profession luminaries got wind of it they kicked up such a fuss about having a lawyer in charge of accounting standards that he had to back off. (By the way, it will be interesting, in that context, to see whether the deputy chairman of ASIC, Jeff Lucy, an accountant, gets up as chairman David Knott`s successor).
Anyway, Boymal is now in charge of accounting standards at a very important time for Australian companies: his five-year term will cover the transition to international accounting standards in 2005-06.
In a nutshell, "harmonisation" with international standards - apart from being a colossal pain in the neck for CFOs - will reduce assets and increase profits.
The main business complaint five years ago was the introduction of goodwill amortisation over 20 years, which meant that whenever a company paid more than net assets in a takeover, profits were reduced by one twentieth of the difference.
Readers might recall there was quite a lot of this sort of thing going on in the late 1990s: the prices paid for companies had very little to do with what assets they actually owned.
The problem is that Scottish, French and German accountants setting international standards, led by the chairman of the International Accounting Standards Board, Sir David Tweedie, do not trust valuations of intangibles such as brands and newspaper mastheads.
Over the past decade Australia has led the world in brand valuation. Gung-ho auditors and bankers in Australia have been quite happy with the idea of valuing brands and including them on the asset side of the balance sheet for the purposes of lending ratios.
But not so the Europeans: they would rather have something they feel. To them, "intangible asset" is an oxymoron.
The answer? Simple: under international accounting standards there is no such thing as an intangible asset unless there is a market for it (like taxi licences, for example) or it has just been traded. Otherwise it simply doesn`t exist.
This means the biggest change when Australia adopts international accounting standards from the financial year beginning in 2005 will be that those companies with revalued intangibles on their balances will have to make them disappear.
This will make profits rise, because there will be less amortisation of intangibles, but assets will fall.
Some companies will breach lending covenants because their gearing ratios rely on brand revaluations. Most companies will be affected to some extent - either because accumulated profit balances will decline and may not cover dividends, or else gearing worsens to such an extent that a new capital issue is required.
Shareholders should not get excited about the fact that profits will generally rise. Analysts usually ignore amortisation when calculating price/earnings ratios, so share prices are unlikely to rise. They certainly shouldn`t rise, because the companies themselves won`t change after 2005.
Apart from selling these changes to frazzled and alarmed corporate CEOs, will Boymal`s main job be simply to man the photocopier to "harmonise" (ie, copy) international accounting standards into Australia?
In the end, yes, but the Government`s decision to bring Australian standards into line with the rest of the world didn`t actually take away either AASB`s setting powers or the Parliament`s power to overrule them.
That means each international standard has to be separately adopted down under and, on each standard, companies will be required to restate their previous accounts under the new standards for comparative purposes - something that has never happened in Australia before.
Shares in Roche Pharmaceuticals, producer of valium, might be a good buy.
If you need assistance with brand valuation, please contact AbsoluteBrand at info@absolutebrand.com.
|
|
Monday, November 10, 2003
|
|
Indian Oil Corporation kickstarts brand valuations
|
|
MUMBAI: In a bid to boost its valuation before a possible public offer, public sector giant Indian Oil Corporation has decided to go in for extensive brand valuation exercise, encompassing the Fortune 500 company`s six key brands.
Market sources say that this is the first instance of a PSU going in for brand valuations. IOC marketing director NG Kannan says the exercise will be flagged off early next year.
The six brands include IOC`s own superbrand Servo, the largest and oldest lubricant brand in the country; Indane, the liquefied petroleum gas brand; Xtra Premium and XtraMile in fuels; and Indian Oil Aviation, its aviation fuel brand.
The company also owns an LPG brand called Auto Gas, which is available in Mumbai, Hyderabad and Bangalore .
N Bhagwat , CEO of Interface Communication, a brand management company, says, "A company usually undertakes valuation of its brands to find its intrinsic strength. The value will thereafter be reflected in the annual report, which will increase the valuation of the company while making a public offer."
Obviously, brand valuation is a pre-cursor to a sale of the brand.
On the marketing front, Kannan says IOC plans to spend Rs 2,400 crore on a revamp programme during this financial year. This includes an investment of Rs 1,000 crore in retail initiatives.
The company has set a target of setting up 900 new retail outlets before the end of this fiscal, of which 552 outlets are already in place.
Under its `Operation Everest` initiative, IOC plans to invest Rs 160 crore in setting up 123 flagship retail outlets along national highways and the golden quadrilateral.
These efforts are an attempt to prepare for deregulation, when the company will have to face competition in the country`s fuel retailing market, say IOC officials.
"We plan to set up a network of retail outlets across the country. This way, we can saturate the market for any competitor trying to enter it," Kannan said. The company will also emphasise on including its `Xtra` branding slogan at retail outlets and on product packages.
It has roped in Leo Burnett to help in branding the retail outlets.
IOC has also signed an MoU with Hyundai Motors to service and sell spare parts of Hyundai vehicles at IOC`s outlets. It plans to introduce its fleet card for truckers by January, Kannan said.
If you need more information on brand valuation please contact info@absolutebrand.com.
|
|
Tuesday, October 07, 2003
|
|
Deductions for Patent Donations Draw Deeper Scrutiny From IRS
|
|
The Internal Revenue Service is reviewing hundreds of millions of dollars of deductions for potentially overvalued patent donations, agency officials say.
Potential abuses of such donations have become a high priority for the IRS over the past year. The IRS already has disallowed tens of millions of dollars of deductions and is in the process of reviewing others, according to the officials.
Tax rules allow companies to claim as a tax deduction the value of patents donated to charities -- such as universities and research centers -- for as much as 10% of taxable income in any one year, and then carry over unused portions for as long as five years. At issue, the IRS officials say, is the failure by some companies to take into account factors that affect fair market value, such as the existence of other similar innovations or restrictions on what the recipient can do with the patent.
Tax specialists say this area is particularly subject to abuse because little disclosure is required by companies in the forms they file with the IRS in claiming a patent-donation deduction. According to IRS officials, companies typically provide a lump-sum dollar amount for patents donated and a brief description. As part of the agency`s reviews, the IRS has been requesting that companies provide additional information about the patents and recipients, as well as valuation reports. Various third-party consultants market such valuation services.
The IRS started to focus on patents after reading news stories in which companies were trumpeting the donations they had made to universities, medical-research institutes and other organizations. Among companies that have made millions of dollars of patent donations in recent years are DuPont Co., Eaton Corp. and Lubrizol Corp., according to a report by M Cam Inc., a Charlottesville, Va., firm that specializes in verifying the uniqueness of intellectual property. M Cam, which has been contracted by the government to help the IRS with its review, presented the report earlier this year to the IRS`s Office of Tax Shelter Analysis.
Lubrizol spokesman Kenneth Iwashita said the last patent donation the company made was in March of 2002, which a news release at the time valued at $22.4 million. Mr. Iwashita said the IRS reviewed the deduction and determined its value was two-thirds of that amount, a decision the company accepted.
Dupont, in a statement, said it has "in the past donated intellectual property to qualified charitable organizations," but declined to comment on the tax treatment of those donations, citing company policy not to discuss tax affairs.
Eaton, in a statement, said the company and the IRS "have discussed and agreed upon the treatment of the donations."
Congress also is looking at the issue. Proposed legislation that cleared the Senate Finance Committee last week includes a provision that calls for patents to receive the same tax treatment as certain other intellectual property, such as copyrights. Current tax rules limit the deduction for copyright donations to the donor`s basis, or investment in creating the copyright. This often equals zero because companies typically deduct expenses as incurred. The Senate Finance Committee estimates this change could generate hundreds of millions of dollars in additional revenue each year.
******
For questions about the value of your intellectual property, please contact AbsoluteBrand at info@absolutebrand.com.
|
|
SEC Requires Exchange Listing Standards for Audit Committees
|
|
FOR IMMEDIATE RELEASE 2003-43
Washington, D.C., April 1, 2003 — The Securities and Exchange Commission today voted to adopt rules directing the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the audit committee requirements established by the Sarbanes-Oxley Act of 2002. The new rules and amendments implement the requirements of Section 10A(m)(1) of the Securities Exchange Act of 1934, as added by Section 301 of the Sarbanes-Oxley Act of 2002.
Under the new rules, national securities exchanges and national securities associations will be prohibited from listing any security of an issuer that is not in compliance with the following requirements.
Each member of the audit committee of the issuer must be independent according to the specified criteria in Section 10A(m).
The audit committee must be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the issuer, and the registered public accounting firm must report directly to the audit committee.
The audit committee must establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
The audit committee must have the authority to engage independent counsel and other advisors, as it determines necessary to carry out its duties.
The issuer must provide appropriate funding for the audit committee.
The new rules will establish Section 10A(m)`s two criteria for audit committee member independence.
Audit committee members must be barred from accepting any consulting, advisory or compensatory fee from the issuer or any subsidiary, other than in the member`s capacity as a member of the board or any board committee.
An audit committee member must not be an affiliated person of the issuer or any subsidiary apart from capacity as a member of the board or any board committee.
The new rules will apply to both domestic and foreign listed issuers. It is important to note that, based on significant input from and dialogue with foreign regulators and foreign issuers and their advisers, several provisions, applicable only to foreign private issuers, have been included that seek to address the special circumstances of particular foreign jurisdictions. These provisions include
allowing non-management employees to serve as audit committee members, consistent with "co-determination" and similar requirements in some countries;
allowing shareholders to select or ratify the selection of auditors, also consistent with requirements in many foreign countries;
allowing alternative structures such as boards of auditors to perform auditor oversight functions where such structures are provided for under local law; and
addressing the issue of foreign government shareholder representation on audit committees.
The new rules also will make several updates to the Commission`s disclosure requirements regarding audit committees, including updates to the audit committee financial expert disclosure requirements for foreign private issuers.
The Commission voted to establish two sets of implementation dates for listed issuers. Generally, listed issuers will be required to comply with the new listing rules by the date of their first annual shareholders meetings after Jan. 15, 2004, but in any event no later than Oct. 31, 2004. Foreign private issuers and small business issuers will be required to comply by July 31, 2005.
www.sec.gov/news/press/2003-43.htm
|
|
Thursday, February 13, 2003
|
|
EU Digs In for Food Fight With WTO Over Names
|
|
Wall Street Journal MEDIA & MARKETING
• WTO`s Agriculture Report Prompts Criticism From EU2
By SCOTT MILLER
Staff Reporter of THE WALL STREET JOURNAL
GENEVA -- Over the centuries, Europe has given the world some of its favorite foods. Now the Continent wants the names of many of them back.
If European negotiators at the World Trade Organization get their way, numerous food names associated with specific regions, from the United Kingdom`s cheddar cheese to the Czech Republic`s pilsner beer to Italy`s balsamic vinegar, will be reserved exclusively for companies located there. With a number of developing countries following the EU`s lead, that could mean that hundreds if not thousands of products could have to be renamed when they are made in places like the U.S. or Australia.
It may not stop there. There are already indications that a number of countries want to police the adjectives used on product labels. And there is even talk that "geographic indications," as they are known, might be extended to include services like restaurants.
It`s a horrifying prospect for retail groups and trade officials, who fear mass consumer confusion and protracted legal fights over how all those goods would be renamed. And that is to say nothing of damage to companies that stand to see the identities of some of their most popular products erased. Already there is talk that the fight, which largely pits the Old World against the New, could derail the current Doha round of trade liberalization talks in Qatar.
"It`s offensive in the extreme to our producers," said Sara Thorn, director of International Trade for the U.S. Grocery Manufacturers Association in Washington. "It`s goofy."
The way the Europeans and other countries see things, it`s all about protecting what is rightfully theirs and helping consumers by eliminating fraudulent producers. Now, they say, people literally have to read the fine print on product labels to find out if it`s the genuine article, or some cheap knockoff. Take mozzarella. EU officials argue that it is only truly made according to exacting standards in a small corner of Italy, and that while cheese from elsewhere may bear the name, it just doesn`t taste the same. "Some of what passes for mozzarella outside of Europe tastes like chewing gum," said Franz Fischler, the European Union`s commissioner for agriculture. "What we want to do is good for consumers."
What`s more, Europeans claim that they sometimes can`t even use their own names when selling abroad. A Canadian or American company, for example, could trademark a product with a European name that would prevent the "rightful" European manufacturer from selling his goods there.
Europe already has a strong example for its food-branding ambitions. In 1995, the world`s major trading nations agreed on rules governing wines and spirits. That, for example, has prevented California and Australian makers of sparkling wines from selling their products as "Champagne" outside their home countries; only bubbly from the northeast corner of France can use that name globally. And the EU itself already has adopted geographic-indication laws governing nearly 600 products. Most recently, for example, Brussels ruled that only Greek companies that use goat milk and specific production methods can market and sell Feta cheese within the EU, much to the irritation of Danish and French makers of a similar product.
For New Worlders, the European idea amounts to nothing more than barefaced protectionism. "This doesn`t speak about free trade, it`s about making a monopoly of trade," said Sergio Marchi, Canada`s ambassador to the WTO. "It`s hard to even calculate the cost and confusion of administrating such a thing."
When Europeans settled the New World, he and others argue, they brought these products and the names with them. How can the Europeans who stayed behind claim their "own" place names now? What the Europeans are really trying to do is cover up for their own inefficient production practices, some charge. European farms, for example, are on the whole smaller and more labor intensive than their counterparts in the wide-open spaces of North America or Australia.
What`s more, some argue, producers in the New World have in a sense earned the right to use these names. It`s huge food companies there, not small mom-and-pop makers back on the Continent, who have marketed and built up the value of many of the product names the Europeans now want to protect, they say.
"Many European producers of wine and food are no longer as competitive, efficient or as innovative as their New World rivals," said David Spencer, Australia`s ambassador to the WTO and an outspoken critic of geographic indications.
The debate at the world trade body is still in its early stages and it is still unclear how many names the Europeans want to reserve or even how to define a geographic indication. India, for example, wants basmati rice to be protected even though basmati isn`t a place name.
Should the Europeans prevail, nonnative food makers would have to go back to the drawing board to invent totally new names for many household staples. Europe is opposed to wording like "-style" or "imitation" on product labels. The goods will literally have to be named something completely different.
American lobbyists argue that there already is a provision for protecting names, the trademark system. Indeed, numerous European names are already included under U.S. "certification marks." An American maker, for example, can`t produce "Rocquefort" cheese, or use the term "Parma" when selling ham. "There should be a way to address European concerns within the trademark system," Ms. Thorn of the GMA said. Europeans, however, say that system leaves too much burden on the maker itself to find and point out offenders. Under the geographic-indications legislation, national governments would do that fighting for them.
Mr. Spencer and others, however, wonder where it will all stop. Europe, for example, argues that some descriptive words on wine labels have cultural connotations and shouldn`t be used by outside producers. In bilateral negotiations outside the WTO, it has pressured some countries to stop selling wine in Europe with labels describing their product as "tawny," a color Europeans say is a traditional expression describing port.
And there are already worries that some companies may try to extend geographic production to services. Italy, for example, would like to test 60,000 Italian restaurants around the world, ensuring that they use Italian-made ingredients.
"Trying to colonize culinary traditions in restaurants and elsewhere is going too far," Canada`s Mr. Marchi said. "Can you imagine inspectors wandering through Italian restaurants in Toronto or checking out tubs in Turkish bath houses in Tokyo?"
For more information about the value of your trademark or certification mark, contact info@absolutebrand.com.
|
|
Tuesday, February 11, 2003
|
|
Google Named Brand of the Year
|
|
In 2002, Google became synonymous in the public imagination with Internet search -- so much so that readers of Interbrand`s BrandChannel.com site voted Google the brand of the year. The search company displaced last year`s winner, Apple, and beat out Coke and Starbucks.
BrandChannel.com asked readers to rate brands on the impact they had on their lives in 2002. Out of 1,315 respondents, Google received 15 percent of the vote for the top spot, beating Apple`s 14 percent share. Coca-Cola ranked No. 3 with 12 percent, followed by Starbucks with 11 percent.
Last year, Google ranked No. 4, garnering 10 percent of the vote for brand of the year.
Interestingly, unlike many dot-coms and even mega-brands like Coke, Google has built a powerful brand while eschewing television ads. The company has instead mostly relied on word-of-mouth marketing. In a similar vein, Amazon.com announced yesterday that it would drop TV advertising and plow the money into free-shipping offers.
According to BrandChannel.com editor Robin Rusch, Google has thrived by staying true to its technology roots, while adding a whimsical logo and catchy name.
"Google is the key to figuring out the Internet," she said, adding that the company had sites in many languages to appeal to a global audience. " A large part of its [marketing] success is through word of mouth."
The Mountain View, Calif., company has long-trumpeted its bare-bones interface, uncluttered with distracting and intrusive ads or the industry`s bete noir, pop-ups.
The approach has clearly paid dividends. Google has built a large and loyal following of its algorithmic search. Its site drew 14.4 million users last week, according to Nielsen//NetRatings, and Google`s search results appear everywhere from on AOL to on Yahoo!.
Google`s ubiquity, however, has not been its only strength. Last July, another branding consultancy, Brand Keys, released a study that showed Google retaining the highest brand loyalty among online brands thanks to high ratings for user satisfaction.
"It just seems like they`re focused on providing good service," said Gary Stein, an analyst with Jupiter Research, which is owned by the parent company of this site. "The image of Google is a small store."
However, the strength of Google`s brand could end up hurting it in its paid-listings business. Rival Overture has harped on the fact that it does not compete with its partners for traffic, while Google has shown signs of developing into a general-purpose portal by adding a news section and shopping-comparison tool.
This tension became apparent in the aftermath of Yahoo!`s $235 million purchase of search-technology provider Inktomi last December. Many analysts saw it as a first step for Yahoo! to sever ties with Google in response to the competitive challenge it feels.
Stein said Google had benefited from a tremendous amount of attention in 2002, particularly from the media. In 2003, however, the company faces tough decisions on a number of fronts, including whether to file for an IPO that would certainly take away its small-store image.
"They`re going to have to deal with all of the issues of the mainstream guys," he said. "They`re going to have to make a decision about what they want to be."
This article can be found online at the following location:
http://siliconvalley.internet.com/news/article.php/1582431. The Internet & IT Network Copyright (c) 2002 Jupitermedia Corporation. All rights reserved.
If you would like more information about the value of your brand, contact AbsoluteBrand at info@absolutebrand.com.
|
|
Wednesday, January 29, 2003
|
|
SEC Charges KPMG and Four KPMG Partners With Fraud
|
|
SEC Charges KPMG and Four KPMG Partners With Fraud in Connection With Audits of Xerox
SEC Seeks Injunction, Disgorgement and Penalties
FOR IMMEDIATE RELEASE
2003-16
Washington, D.C., January 29, 2003 — The Securities and Exchange Commission today sued KPMG LLP and four KPMG partners - including the head of the firm`s department of professional practice - in connection with the audits of Xerox Corp. from 1997 through 2000. The Commission`s action, filed in federal district court in New York, charges the firm and four partners with fraud, and seeks injunctions, disgorgement of all fees and civil money penalties.
The Commission alleges that KPMG and its partners permitted Xerox to manipulate its accounting practices to close a $3 billion "gap" between actual operating results and results reported to the investing public. Year after year, the defendants falsely represented to the public that their audits were conducted in accordance with applicable auditing standards and that Xerox`s financial reports fairly represented the company`s financial condition and were prepared in accordance with GAAP.
"The spectacular upheaval in the corporate landscape over the last year highlights the critical responsibility that auditors have in the financial reporting process," said Stephen M. Cutler, the SEC`s Director of the Division of Enforcement. "In their audits of Xerox, KPMG and its partners abdicated that responsibility."
"The investing public counts on the audit profession to do their job with unfailing dedication to the principles of accounting, regardless of the wishes of their audit clients," said Paul R. Berger, an Associate Director of Enforcement. "The failure by the audit firm and its partners in the Xerox case represents a troubling episode and one that cannot and should not be repeated."
The four partners named as defendants, all of whom are certified public accountants, are:
Michael A. Conway, 59, a resident of Westport, Conn., has been KPMG`s Senior Professional Practice Partner and the National Managing Partner of KPMG`s Department of Professional Practice since 1990. He was the senior engagement partner on the Xerox account from 1983 to 1985. He again became the lead worldwide Xerox engagement partner for the 2000 audit. Conway also is a member of the KPMG board and is chairman of the KPMG Audit and Finance Committee.
Joseph T. Boyle, 59, a resident of New York City, was the "relationship partner" on the Xerox engagement in 1999 and 2000 and is a managing partner of the New York office of KPMG and of the Northeast Area Assurance (Audit) Practice. As the relationship partner, Boyle`s chief duty was serving as liaison between KPMG and the Xerox Board of Directors, including its Audit Committee.
Anthony P. Dolanski, 56, a resident of Malvern, Pa., was the lead engagement partner overseeing Xerox`s audits from 1995 through 1997. He left KPMG in 1998. He is currently the chief financial officer of the Internet Capital Group, a public company.
Ronald A. Safran, 49, a resident of Darien, Conn., was the lead engagement partner on the 1998 and 1999 Xerox audits. He was removed as engagement partner at Xerox`s request after completing the 1999 audit and was replaced by Conway. KPMG or its predecessor has employed Safran since his graduation from college in 1976.
According to the complaint (a more detailed recitation of the complaint`s allegations is attached):
KPMG affiliate offices in Europe, Brazil, Canada and Japan, as well as KPMG auditors at Xerox`s main U.S. operations facility in Rochester, N.Y., repeatedly warned the defendant KPMG partners, who had overall responsibility for the Xerox audit engagement, that manipulative actions taken by Xerox to improve revenues and earnings were unnecessary, were not adequately tested, and distorted true business results. The defendant KPMG partners, who worked near Xerox headquarters in Stamford, Conn., or at KPMG`s New York headquarters, gave little weight to these warnings from on-the-scene KPMG affiliates and did not demand that Xerox justify the reasons for departures from historic accounting methods or establish the accuracy of the new, manipulative practices.
Although the defendants occasionally voiced concern to Xerox management about the "topside accounting devices" developed and manipulated by senior corporate financial managers to increase revenue and earnings, the defendants did little or nothing when Xerox ignored their concerns and continued manipulating its financial results. The defendants then knowingly or recklessly set aside their reservations, failed in their professional duties as auditors, and gave a clean bill of health to Xerox`s financial statements. Rather than put at risk a lucrative financial relationship with a premier client, the defendants failed to challenge Xerox`s improper accounting actions and make the company accurately report its financial results. As noted in the complaint: "There was no watchdog at Xerox. KPMG`s bark sounded no warning to investors; its bite was toothless."
After this fraudulent conduct was investigated and exposed, Xerox, employing a new auditor, issued a $6.1 billion restatement of its equipment revenues and a $1.9 billion restatement of its pre-tax earnings for the years 1997 through 2000. The Commission`s fraud allegations against KPMG and its partners address accounting errors that inflated equipment revenues by $3 billion and inflated pre-tax earning by $1.2 billion for the years 1997 through 2000.
The Complaint alleges that each defendant violated Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 10A of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 10b-5, and aided and abetted violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 13a-1, 13a-13, 13b2-1 and 12b-20.
On April 11, 2002, the Commission brought an injunctive action against Xerox based on the same allegations of accounting fraud as are alleged against the KPMG defendants, as well as other allegations. Without admitting or denying the allegations of the complaint, Xerox consented to the entry of a Final Judgment that permanently enjoined the company from violating the antifraud, reporting and record keeping provisions of the federal securities laws. Xerox also paid a $10 million civil penalty, agreed to restate its financial statements and agreed to hire a consultant to review the company`s internal accounting controls and policies. Securities and Exchange Commission v. Xerox Corporation, Civil Action No. 02-CV-2780 (DLC) (S.D.N.Y.) (April 11, 2002). See Litigation Release No. 17465 / April 11, 2002/Accounting and Auditing Enforcement Release No. 1542 / April 11, 2002. ##
www.sec.gov/news/press/2003-16.htm
|
|
Thursday, January 23, 2003
|
|
SEC Filing Statements by Company CEOs and CFOs
|
|
Statements by Company CEOs and CFOs
Updated as of 1/23/2003
Companies whose CEOs and CFOs are required to file sworn statements with the US Securities and Exchange Commission are listed the URL elow. The Commission will electronically scan and post all statements after they are received. Once a statement has been scanned and posted, it can be viewed by clicking on the receipt date indicated for a company. Please note that there are separate tables for CEO and CFO. The CFO statement table follows the CEO statement table.
After a filed statement has been reviewed by the Commission staff, the boxes below will indicate whether the written statement is in the form of Exhibit A of the Commission`s order or whether a statement in a different form has been filed.
The Anticipated Periodic Report Due Date has been determined using information supplied by the Companies directly to us or to our EDGAR database. A Company may file a Notification of Late Filing and receive a five day extension on the due date for a Form 10-Q or a 15 day extension on the due date for a Form 10-K, which will also extend the due date for the related sworn statements.
www.sec.gov/rules/extra/ceocfo.htm
|
|
Wednesday, January 22, 2003
|
|
Commission Adopts Rules Strengthening Auditor Independence
|
|
Washington, D.C., January 22, 2003 — The Securities and Exchange Commission today voted to adopt rules to fulfill the mandate of Title II of the Sarbanes-Oxley Act of 2002, strengthen auditor independence and require additional disclosures to investors about the services provided to issuers by the independent accountant.
The Commission approved measures that will
revise the rules related to the non-audit services that, if provided to an audit client, would impair an accounting firm`s independence;
require that certain partners on the audit engagement team rotate after no more than five or seven consecutive years, depending on the partner`s involvement in the audit, except that certain small accounting firms may be exempt from this requirement;
establish rules that an accounting firm would not be independent if certain members of management of that issuer had been members of the accounting firm`s audit engagement team within the one-year period preceding the commencement of audit procedures;
establish rules that an accountant would not be independent from an audit client if any "audit partner" received compensation based on the partner procuring engagements with that client for services other than audit, review and attest services;
require the auditor to report certain matters to the issuer`s audit committee, including "critical" accounting policies used by the issuer;
require the issuer`s audit committee to pre-approve all audit and non-audit services provided to the issuer by the auditor; and
require disclosures to investors of information related to audit and non-audit services provided by, and fees paid to, the auditor.
Non-Audit Services
Section 201 of the Sarbanes-Oxley Act lists nine non-audit services that, if provided by the accounting firm, impair the firm`s independence. The rules approved for adoption by the Commission, will define the prohibited services as follows.
Bookkeeping or other services related to the accounting records or financial statements of the audit client
The rules will prohibit an accountant from auditing the bookkeeping work performed by his or her accounting firm.
Financial information systems design and implementation
Consistent with our previous rules, these rules will prohibit the accounting firm from providing any service related to the audit client`s information system, unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit client`s financial statements. These rules will not preclude an accounting firm from working on hardware or software systems that are unrelated to the audit client`s financial statements or accounting records as long as those services are pre-approved by the audit committee.
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
Appraisal and valuation services include any process of valuing assets, both tangible and intangible, or liabilities. Fairness opinions and contribution-in-kind reports are opinions and reports in which the firm provides its opinion on the adequacy of consideration in a transaction. These rules will prohibit the accountant from providing such services unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit client`s financial statements.
Actuarial services
These rules will prohibit an accountant from providing to an audit client any actuarially oriented advisory service involving the determination of amounts recorded in the financial statements and related accounts for the audit client unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit client`s financial statements. The accountant, however, may assist a client in understanding the methods, models, assumptions and inputs used in computing an amount.
Internal audit outsourcing services
These rules will prohibit the accountant from providing any internal audit service that has been outsourced by the audit client that relates to the audit client`s internal accounting controls, financial systems or financial statements unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit client`s financial statements.
During the conduct of the audit or when providing attest services related to internal controls, the auditor evaluates the company`s internal controls and, as a result, may make recommendations to the audit client for improvements to the controls. Doing so is a part of the accountant`s responsibilities under GAAS or applicable attestation standards and, therefore, is not a prohibited service.
Management functions or human resources
Consistent with our proposal, the final rules will prohibit the accountant from acting, temporarily or permanently, as a director, officer or employee of an audit client, or performing any decision-making, supervisory, or ongoing monitoring function for the audit client.
These rules also will provide that an accountant`s independence is impaired with respect to an audit client when the accountant seeks out prospective candidates for managerial, executive or director positions; acts as negotiator on the audit client`s behalf; or undertakes reference checks of prospective candidates. Under the rule, an accountant`s independence also will be impaired when the accountant engages in psychological testing or other formal testing or evaluation programs, or recommends or advises the audit client to hire a specific candidate for a specific job.
Broker or dealer, investment adviser, or investment banking services
Acting as a broker-dealer (registered or unregistered), promoter or underwriter on behalf of an audit client and similar activities will make the accountant an advocate for the audit client and will impair the accountant`s independence.
Legal services
An accountant will be prohibited from providing to an audit client any service that, under circumstances in which the service is provided, could be provided only by someone licensed, admitted, or otherwise qualified to practice law in the jurisdiction in which the service is provided.
Expert services unrelated to the audit
These rules will prohibit an accountant from providing expert opinions or other expert services to an audit client, or a legal representative of an audit client, for the purpose of advocating that audit client`s interests in litigation or in a regulatory or administrative proceeding or investigation. An accountant`s independence will not be impaired, however, by an accountant providing factual accounts or testimony or explaining the positions taken or conclusions reached during the performance of any service by the accountant.
Audit Committee Pre-Approval of Services Provided by Auditor
Sections 201 and 202 of the Sarbanes-Oxley Act provide that an issuer`s audit committee must pre-approve allowable services to be provided by the auditor of the issuer`s financial statements. The rules will implement those sections of the Act by requiring that the audit committee pre-approve all services. In doing so, the audit committee may establish policies and procedures for pre-approval provided they are consistent with the Act, detailed as to the particular service, and designed to safeguard the continued independence of the accountant.
Consistent with the Act, the rules also will reflect a de minimis exception solely related to the provision of non-audit services for an issuer. This exception waives the pre-approval requirements for non-audit services provided that all such services (1) do not aggregate to more than five percent of total revenues paid by the audit client to its accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or one or more designated representatives.
Disclosures to Investors of Services Provided by the Auditor
Section 202 of the Sarbanes-Oxley Act will require disclosure in periodic reports of non-audit services approved by the audit committee. The rules will require that issuers provide, in their annual reports, fees paid to the independent accountant for (1) audit services, (2) audit-related services, (3) tax services, and (4) other services. Additionally, the disclosures must include the audit committee`s policies and procedures for pre-approval of services by the independent accountant as well as the percent of fees paid subject to the de minimis exception.
Permitted Non-audit Service — Tax Service
Section 201 of the Sarbanes-Oxley Act specifically provides that "a registered public accounting firm may engage in any non-audit service, including tax services," that is not expressly prohibited, after audit committee pre-approval. Accordingly, accountants will be able to continue to provide tax compliance, tax planning and tax advice to audit clients, subject to audit committee pre-approval requirements. There are, however, some circumstances where providing certain tax services to an audit client would impair the independence of an accountant, such as representing an audit client in tax court or other situations involving public advocacy.
Audit Partner
The rules will define a new term-audit partner-for purposes of the requirements for partner rotation and partner compensation. An audit partner will be defined as a partner who is a member of the audit engagement team who has responsibility for decision-making on significant auditing, accounting and reporting matters that affect the financial statements or who maintains regular contact with management and the audit committee. The term audit partner will include the lead and concurring partners as well as partners who serve the client at the issuer level, other than a partner who consults with others on the audit engagement team regarding technical or industry-specific issues, and the lead partner on subsidiaries of the issuer whose assets or revenues constitute 20% or more of the consolidated assets or revenues of the issuer.
Partner Rotation
Section 203 of the Sarbanes-Oxley Act specifies that the lead and concurring partner must be subject to rotation requirements after five years. The rules will specify that the lead and concurring partner must rotate after five years and be subject to a five-year "time out" period after rotation. Additionally, certain other significant audit partners will be subject to a seven-year rotation requirement with a two-year time out period.
Compensation
The new rule will provide that an accountant is not independent if, at any point during the audit and professional engagement period, any audit partner earns or receives compensation based on that partner procuring engagements with the audit client to provide any services other than audit, review or attest services.
Cooling Off Period
Section 206 of the Sarbanes-Oxley Act establishes a one-year cooling off period before a member of the audit engagement team may accept employment in certain, designated positions with an issuer. The rules, therefore, will provide that an accounting firm is not independent if a member of management involved in overseeing financial reporting matters was the lead partner, the concurring partner, or any other member of the audit engagement team who provided more than ten hours of audit, review or attest services for the issuer within the one year period preceding the commencement of the audit of the current year`s financial statements.
Auditor Communication With Audit Committee
Section 204 of the Sarbanes-Oxley Act directs the Commission to issue rules requiring timely reporting of specific information by accountants to audit committees. In response to the Act, the rules will require the accounting firm to report, prior to the filing of its audit report with the Commission, to the audit committee (1) all critical accounting policies and practices used by the issuer; (2) all material alternative accounting treatments of financial information within GAAP that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the accounting firm; and (3) other material written communications between the accounting firm and management.
Small Business/Small Firm Considerations
We recognize that some of these provisions may impose an undue burden on certain smaller accounting firms. Accordingly, the rules will provide that firms with fewer than five audit clients and fewer than ten partners may be exempt from the partner rotation and compensation provisions, provided each of these engagements is subject to a special review by the Public Company Accounting Oversight Board at least every three years.
Foreign Considerations
Foreign accounting firms or foreign private issuers may face additional issues in implementing certain rules. Changes to the proposed rule relating to the depth of partner rotation and the scope of personnel subject to the "cooling off" period apply to foreign accounting firms. Moreover, additional time is being afforded to foreign accounting firms with respect to compliance with rotation requirements. The release also provides guidance on the provision of non-audit services by foreign accounting firms, including the treatment of legal services and tax advice. The SEC also stands ready to work with other regulatory bodies on these issues.
These measures will be effective 90 days after their publication in the Federal Register, with appropriate transition periods for various provisions.
* * *
The full text of detailed releases concerning each of these items will be posted to the SEC Web site as soon as possible.##
http://www.sec.gov/news/press/2003-9.htm
To avoid potential conflicts of interest, hire an independent valuation firm. For more information, contact info@absolutebrand.com.
|
© absoluteBRAND News
|