Deloitte comments on US Securities and Exchange Commission legislation on US listed companies in extractive industries
24 August 2012
Mark Kennedy, Deloitte tax director, said:
“The US Securities and Exchange Commission (SEC) has passed legislation which requires companies in the extractive industries with a US listing to be transparent about payments made to governments. Those within the rules will be required to file an electronically tagged form with the SEC no later than 150 days after the end of their fiscal year. The rules will apply for fiscal years ending after 30th September 2013, though the SEC has allowed that the first report may be a ‘partial’ report disclosing only payments made after this date. Over 1,000 businesses are understood to be affected. They will now be required to publish payments exceeding US$100,000 on a project by project basis, a level of detail which greatly exceeds current requirements in the US or elsewhere. What constitutes a ‘project’ is not defined in the rules, allowing for different business contexts. The ‘payments’ to be disclosed are wider than taxes and include contributions to infrastructure improvements. This may be important for companies in showing that their contributions to a country go beyond taxes.
“UK companies with US listings will be affected as could UK subsidiaries of affected US groups. The EU is currently reviewing a similar draft provision which would create comparable reporting obligations.
“If they have not done so already, organisations subject to the US rules will now need to consider the potential strategic, legal and commercial implications of these disclosures. In addition, companies will need to consider whether their existing financial and reporting systems are capable of producing the required information and the assurance they might need over the accuracy of this data. The financial impact is expected be significant, with the SEC estimating the initial cost of compliance to be up to US$1 billion and continuing compliance between US$200 million to US$400 million. Some industry representatives have argued it could be much more costly than this.”
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