Disclaimer

1. U.S. Securities and Exchange CommissionCurrentAccounting Initiatives and TopicsPresentation to NARUCDouglas T. ParkerProfessional Accounting FellowOffice of the Chief AccountantU.S. Securities and Exchange CommissionOctober 13, 2008

2. Disclaimer • The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. Therefore, the views expressed today are my own, and do not necessarily reflect the views of the Commission or the other members of the staff of the Commission.

3. Discussion Topics • Interacting with the SEC • IFRS in the U.S. • Advisory Committee on Improvements to Financial Reporting • Materiality and Correction of Errors • Use of Judgment • Interactive Data • Fair Value • Other Initiatives

4. Interacting with the SEC

5. Who We Are • SEC registrants and their auditors may interact with the agency through the: • Division of Corporation Finance • Office of the Chief Accountant

6. Division of Corporation Finance • Mission is to see that investors are provided with material information in order to make informed investment decisions • Mandated to review SEC filings at least once every three years • Responding to comment letters

7. Office of the Chief Accountant • Chief Accountant • Principal advisor to the Commission on accounting and auditing matters • Main groups in OCA • Accounting • Professional Practice (Audit and Independence) • International Affairs • Interactive Disclosure (XBRL) • Responsibilities • Rulemaking, interpretive guidance and reports • Oversight of standard setting • Consultations

8. Consultations Whom to Contact • Division of Corporation Finance • Reporting questions • E.g., application of regulation S-X • Requests for waivers / accommodations from reporting requirements • Contact: 202-551-3400 or DCAOletters@sec.gov • Office of the Chief Accountant • Accounting or auditor independence questions • Contact: 202-551-5300 or OCA@sec.gov

9. Consultations Consultations with OCA • Discussion with OCA staff members • Pre-filing basis – requests from registrants • Post-filing basis – • Internal consultations from Divisions of Corporation Finance and Enforcement • Requests from registrants

10. Consultations with OCA Guidance for Pre-Filing Consultations • Take advantage of it! • Most companies just “want to get the accounting right.” We want to help. • Perhaps easier than post-filing basis (e.g., comment letter process) • Guidance for resolving ‘pre-filing’ questions is posted on the SEC’s website • http://www.sec.gov/info/accountants/ocasubguidance.htm

11. IFRS in the U.S.

12. Background IFRS has become more prevalent over the past several years • Over 100 countries permit or require the use of IFRS • Since 2002, the FASB and IASB agreed to work together to converge U.S. GAAP and IFRS • Business combinations • Financial statement presentation • Conceptual framework • Revenue recognition • Leases

13. Foreign Private Issuers FPIs are now permitted to file without a reconciliation to U.S. GAAP in certain cases • Adopting release issued in December 2007 – available at http://www.sec.gov/rules/final/2007/33-8879.pdf • Effective for fiscal years ended after December 15, 2007 • Only applies to FPIs reporting under IFRS as issued by the IASB • Currently, more than 100 FPIs report under IFRS without a reconciliation • Estimated to increase to approximately 500 by 2011

14. U.S. Issuers SEC considering use of IFRS as issued by the IASB by U.S. issuers • Concept release issued in August 2007 • Roundtables held in December 2007 and August 2008 • Proposing release • Comments due 60 days from publication in Federal Register • Main proposed provisions • Roadmap to possible Commission decision on mandatory adoption • Optional IFRS adoption

15. U.S. Issuers – IFRS Proposing Release Roadmap to possible Commission decision on mandatory adoption • Identifies milestones to achieve prior to possible Commission decision • IFRS’s continued improvement • Greater accountability and more stable funding of IASB’s governing body • IFRS XBRL taxonomy • Education and training

16. U.S. Issuers – IFRS Proposing Release Roadmap to possible Commission decision on mandatory adoption • Expects decision regarding mandatory IFRS adoption in 2011, effective for fiscal years ending on or after December 15, • 2014 for large accelerated filers • 2015 for accelerated filers • 2016 for non-accelerated filers • May consider early adoption for those companies not eligible in 2009

17. U.S. Issuers – IFRS Proposing Release Optional IFRS Adoption • Certain U.S. issuers may file under IFRS for years ending on or after December 15, 2009 • Eligible companies • Must meet two criteria • Among the 20 largest companies in their industry • IFRS must be used more than any other GAAP amongst the 20 largest companies in that industry • Receive a no-objection letter from SEC staff in response to their justification of their eligibility • At least ~110 companies in ~34 industries estimated to be eligible, representing ~14% of U.S. market capitalization

18. U.S. Issuers – IFRS Proposing Release Optional IFRS Adoption • Seeks comments on U.S. GAAP reconciliation • Option A: disclose an audited reconciliation of U.S. GAAP to IFRS only in the first year of reporting under IFRS (consistent with IFRS 1) • Option B: Option A AND disclose unaudited reconciliation of IFRS to U.S. GAAP on an ongoing basis for all periods presented

19. U.S. Issuers – Application of IFRS to Energy & Utility Companies Potentially significant differences from U.S. GAAP: • Accounting for the effects of regulation • Impairment • Financial instruments • Inventories

20. Advisory Committee on Improvements to Financial Reporting (CIFiR)

21. Advisory Committee on Improvements to Financial Reporting (CIFiR) • Emanated from concerns about complexity of financial reporting • Examined the U.S. financial reporting system to • increase usefulness to investors and • reduce complexity • Chaired by Robert Pozen • Composed of preparers, investors, audit committee representatives, auditors, attorneys and regulators • Observers from the FASB, PCAOB, IASC, Federal Reserve Board and Department of Treasury

22. Advisory Committee on Improvements to Financial Reporting (CIFiR) • 12-month duration concluded with issuance of final report on August 1, 2008 • Final report includes 25 recommendations in four areas: • Substantive complexity • Standards-setting process • Audit process and compliance • Delivering financial information • SEC staff studying recommendations for possible future action • Materials available at http://www.sec.gov/about/offices/oca/acifr.shtml

23. Advisory Committee on Improvements to Financial Reporting (CIFiR) Substantive Complexity • Judicious expansion of fair value • Improved financial statement presentation • Development of a disclosure framework • Coordination of SEC and FASB to regularly assess continued relevance of disclosure guidance • Reduction of bright lines in accounting guidance • Reduction in exceptions to general principles, such as: • Industry-specific guidance • Alternative accounting policies • Scope exceptions • Competing models

24. Advisory Committee on Improvements to Financial Reporting (CIFiR) Standards-Setting Process • Afford investor perspectives pre-eminence in standards-setting • Continue to enhance governance of the FASB • Create a Financial Reporting Forum • Enhance FASB’s field work prior to adoption • Formalize post-adoption reviews of new standards and periodic assessments of existing standards • Clarify authoritative vs. non-authoritative guidance • Improve understandability of accounting standards

25. Advisory Committee on Improvements to Financial Reporting (CIFiR) • Audit Process and Compliance • Materiality • Error Correction • Reasonableness of accounting judgments These areas will be discussed later.

26. Advisory Committee on Improvements to Financial Reporting (CIFiR) • Delivering Financial information • Mandate use of XBRL - to be discussed later • Provide guidance on the use of corporate websites • Interpretative release available at http://www.sec.gov/rules/interp/2008/34-58288.pdf • Comments due November 5, 2008 • Encourage development of key performance indicators • Encourage issuance of updated guidance on best practices for earnings releases • Mandate inclusion of executive summary in filings

27. Materiality and • Corrections of Errors

28. Background • Existing guidance • Additional issues • SEC staff studying CIFiR recommendations

29. CIFiR’s Recommendations • Materiality • Based on perspective of reasonable investor • Consider total mix of information • Error correction • All errors, except clearly insignificant ones, should be corrected promptly • HOWEVER, do not always restate and amend • Disclosure

30. CIFiR’s Recommendations • Interim periods • Same principles apply • Restatement of interim period does not always require restatement of annual period • Dark period disclosures • Nature of error • Impact of error • Management response

31. Use of Judgment

32. Use of Judgment • Why important • Examples • CIFiR recommendation • SEC should articulate how it evaluates the reasonableness of accounting judgments • SEC staff studying recommendation

33. CIFiR’s Suggested Factors • When evaluating reasonableness of judgments, SEC should consider preparer’s consideration of: • Facts, including substance of transaction • Accounting literature • Alternative views • Investors’ information needs • Input from those with professional expertise • Known diversity in practice • Consistency with application to other similar transactions • Appropriateness and reliability of assumptions and data

34. Interactive Data

35. Potential Benefits • What is interactive data? • Benefits to investors, analysts & other users • Direct, real-time access to instantly consumable data • Interactive, personalized analysis • Lower cost of more complete data set • Benefits to registrants and preparers of reports • Efficient preparation, internal data collection, analysis and release of information • Direct communication channel with investors and stakeholders

36. Interactive Data Timeline • 2008 • Analysis of public comment on proposed rules • Credit rating proposed rule • Proposed rule on oil and gas disclosures in interactive data 10/2007 Creation of new SEC Office of Interactive Disclosure 4/2008 Release of Final US GAAP Taxonomy 7/2006 Roundtables, field work 12/2006 First SEC XBRL Viewer 2005 SEC Establishes Voluntary Filing Program 2004 Early SEC Analysis of XBRL 2005 Chairman Cox identifies XBRL as strategic priority 9/2006 $54mm investment in XBRL, EDGAR modernization 7/2007 VFP Expands to Mutual Fund Risk/Return 12/2007 Release of Draft US GAAP Taxonomy 5/2008 Release of Draft Rule

37. Proposed Rule Requires companies to provide to the Commission financial statements in interactive data format using eXtensible Business Reporting Language, or XBRL. Covers: Annual and quarterly reports Transition reports Securities Act registration statements

38. Proposed phase-in schedule Year 1 - domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion. Year 2 - all other domestic and foreign large accelerated filers using U.S. GAAP would be subject to interactive data reporting. Year 3 - all remaining filers using U.S. GAAP and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB. If proposed rules are adopted, the first phase would begin with fiscal periods ending on or after December 15, 2008

39. Data tagging details For each phase of implementation: The face of the financial statements would be tagged in each filer's first year of interactive data reporting. The financial statement footnotes and financial statement schedules also would be tagged in each filer's first year, but in block text only. After the first year of such tagging, a filer also would be required to tag the detailed disclosures within the footnotes and schedules.

40. What can I do now? Use available resources to get smart on XBRL http://www.sec.gov/spotlight/xbrl.shtml http://www.xbrl.us

41. Fair Value

42. Other Initiatives

43. Other Initiatives • Sarbanes-Oxley Act – section 404 • Modernization of oil and gas reporting requirements

44. Questions