Rule 13e-3RevisedSupporting Statement IFRS Proposing Rel (09-09-09)

SUPPORTING STATEMENT FOR PROPOSED RULES

UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND INVESTMENT COMPANY ACT OF 1940

This submission, pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. §3501, et seq., consists of this supporting statement and the following attachments:

1. Statutory Authority

2. Proposing Release

A. JUSTIFICATION

1. NECESSITY FOR THE INFORMATION COLLECTION

In Securities Act Release No. 8982,¹ the Commission proposed amendments to Regulations S-X,² S-K³ and C⁴ under the Securities Act of 1933,⁵ and Rule 12b-2,⁶ Schedule 13E-3,⁷ Schedule TO,⁸ Regulation G,⁹ and Form 8-K,¹⁰ under the Securities Exchange Act of 1934.¹¹ The proposals set forth a “Roadmap” for the potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board by U.S. issuers for purposes of their filings with the Commission. This Roadmap sets forth several milestones that, if achieved, could lead to the mandatory use of IFRS by U.S. issuers in 2014 if the Commission believes it to be in the public interest and for the protection of investors.

2. PURPOSE OF THE INFORMATION COLLECTION

The Commission is proposing a Roadmap that sets forth the potential use of IFRS as issued by the International Accounting Standards Board by U.S. issuers as part of its consideration of the role a single set of high-quality accounting standards plays in investor protection and the efficiency and effectiveness of capital formation. The proposed amendments would be available to only a limited number of U.S. companies that operate in industry sectors in which IFRS is used more than any other set of accounting standards. The proposed amendments include a process by which U.S. companies would seek confirmation from Commission staff that they are eligible to use IFRS in their Commission filings before switching to IFRS accounting. The Request for a Letter of No Objection to use IFRS would constitute a new collection of information under the Exchange Act.

3. USE OF ELECTRONIC MEDIA

Forms 8-K, 10-K, 10-Q and S-4; and Schedules 14A, 14C, TO and 13E-3 are filed electronically with the Commission using the Commission’s Electronic Data Gathering and Retrieval (“EDGAR”) system.

4. DUPLICATION

The proposed disclosure would not duplicate, overlap, or conflict with other federal rules.

5. METHODS USED TO MINIMIZE BURDEN ON SMALL BUSINESSES

Compliance with the proposed amendments should increase costs and burdens for companies that switch to IFRS accounting. The proposals, however, were designed to exclude smaller reporting companies from the group of issuers that would be eligible to elect to switch to IFRS financial statements under the proposed amendments. For these reasons, the proposed amendments should not have a significant economic impact on small entities.

6. DESCRIPTION OF CONSEQUENCES OF LESS FREQUENT COLLECTION

The forms and schedules that would be affected by the proposed amendments set forth the disclosure requirements for annual, quarterly and current reports; registration statements; tender offer and going private transaction statements; and proxy and information statements filed by U.S. issuers to help shareholders make informed voting and investment decisions. Less frequent collection would deprive investors to access of information that is important to their voting and investment decisions.

7. EXPLANATION OF SPECIAL CIRCUMSTANCES

Not applicable.

8. CONSULTATION OUTSIDE THE AGENCY

The Commission has amended Forms 8-K, 10-K, 10-Q and S-4; and Schedules 14A, 14C, TO and 13E-3 several times since their adoption. Proposed changes are published for public comment. The Commission is soliciting comment on the proposed amendments. A copy of this release is attached.

9. PAYMENT OR GIFT TO RESPONDENTS

Not applicable.

10. ASSURANCE OF CONFIDENTIALITY

Not applicable.

11. SENSITIVE QUESTIONS

Not applicable.

12. and 13. ESTIMATE OF HOUR AND COST BURDENS

The proposed amendments would allow certain U.S. companies to file their financial statements in accordance with IFRS, rather than U.S. GAAP, for use in their periodic and current reports made under Section 13(a) or 15(d) of the Exchange Act; Schedules 14A and 14C under the Exchange Act, as well as in registration statements under the Securities Act and Exchange Act. We anticipate that the proposed amendments would increase the burdens and costs for U.S. companies that switch from U.S. GAAP to IFRS accounting. We derived the burden estimates for the forms and schedules by estimating the total amount of time that it would take a company to prepare its financial statements in accordance with IFRS.¹²

We calculated our estimates using the number of filings, over the past three years, received from a selection of companies with characteristics similar to those that we currently anticipate would be eligible to rely on the proposed amendments, if adopted.¹³ The estimates include the time and the cost of in-house preparers, reviews by executive officers, in-house counsel, outside consultants and members of the audit committee. We assumed that the transition from U.S. GAAP to IFRS by eligible companies would be a multi-year process. Therefore, our PRA estimates represent the average annual burden over a three-year period. In addition, we assumed that substantially all of the burdens associated with the proposed amendments would be associated with Form 10-K and, to a lesser extent, Form 10-Q as these would be the primary forms for which IFRS financial statements would be prepared and presented, and that any IFRS financial statements that would be required in the other forms and schedules would be incorporated from Forms 10-K and 10-Q. We note, however, that the hour burdens of the proposed amendments are difficult to ascertain, because the burdens could vary widely due to differences in the business and accounting systems of each company. Therefore, our estimates are based on averages among the various types and sizes of companies.

Table 1 below breaks down these costs across the range of forms and schedules that would be affected by the proposed amendments. The burden was calculated by multiplying the estimated number of responses by the estimated average number of hours a company would spend completing the different forms and schedules. For Exchange Act reports, the proxy and information statements, Schedules TO and 13E-3, and the Request for a Letter of No Objection to use IFRS, we estimate that 75% of the burden of preparation is carried by the company internally and that 25% of the burden of preparation is carried by outside professionals at an average cost of $400 per hour. For Form S-4, we estimate that 25% of the burden of preparation is carried by the company internally and that 75% of the burden of preparation is carried by outside professionals retained by the company at an average cost of $400 per hour. There is no change to the estimated burden of the collections of information entitled “Regulation S-K,” “Regulation S-X,” and “Regulation C” because the burdens that these regulations impose are reflected in our revised estimates for the forms. The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried by the company internally is reflected in hours.

Table 1:

	Estimated Number of Responses (A)	Incremental Burden Hours/Form (B)	Total Incremental Burden Hours (C)=(A)*(B)	75% Company (D)=(C)*0.75	25% Professional (E)=(C)*0.25	Professional Costs (F)=(E)*$400
10-K	110	50,636	5,569,960	4,177,470	1,392,490	$556,996,000
10-Q	330	4,134	1,364,220	1,023,165	341,055	$136,422,000
8-K	880	110	96,800	72,600	24,200	$9,680,000
Sch. 14A	108	1	108	81	27	$10,800
Sch. 14C	2	1	2	1.5	0.5	$200
Sch. TO	1	1	1	0.75	0.25	$100
Sch. 13E-3	1	0	0	0.75	0.25	$0
Form S-4	6	1	6	1.5	4.5	$1,800
No Objection Request	110	50	5,500	4,125	1,375	$550,000
Reg. S-K	N/A	N/A	N/A	N/A	N/A	N/A
Reg. S-X	N/A	N/A	N/A	N/A	N/A	N/A
Reg. C	N/A	N/A	N/A	N/A	N/A	N/A

14. ESTIMATE OF COST TO FEDERAL GOVERNMENT

The estimated cost of preparing the proposed amendments was approximately $125,000.

15. EXPLANATION OF CHANGES IN BURDEN

Table 2 below illustrates the changes in cost and hour burdens from the burden estimates currently approved by OMB. Columns (A) and (B) represent the most recent burden estimates submitted to OMB. Columns (C) and (D) represent the change in burden from the most recent estimates. Columns (E) and (F) represent the program change, which encompasses any change in burden that is attributable to the proposed amendments. We anticipate that the proposed amendments would increase the burdens and costs for U.S. companies that switch from U.S. GAAP to IFRS accounting. The burdens and costs include costs to transition to IFRS reporting, such as determining the effect of first-time IFRS adoption, accounting systems changes to support financial reporting using IFRS, and potentially higher costs for accounting personnel and outside consultants who are familiar with IFRS. We anticipate that substantially all of the burdens associated with the proposed amendments would be related to Form 10-K and, to a lesser extent, Form 10-Q as these would be the primary forms in which IFRS financial statements would be presented; any IFRS financial statements that would be required in the other forms and schedules would be incorporated from Forms 10-K and 10-Q.

We made additional adjustments to the cost burdens of Schedules 14A, 14C and TO due to a change in the method we used to calculate the cost burdens. The adjustment to our calculation method resulted in an increase in the cost burdens of Schedules 14A, 14C and TO. Table 3 below illustrates the changes in cost burdens due to the revised estimate.

Table 2:¹⁴

	Current Burden		Change in Burden		Program Change
	Burden Hours (A)	Cost (B)	Burden Hours (C)	Costs (D)	Burden Hours (E)	Cost (F)
10-K	21,337,939	$2,845,058,500	25,515,409	$3,402,054,500	4,177,470	$556,996,000
10-Q	4,565,268	$608,702,400	5,588,433	$745,124,400	1,023,165	$136,422,000
8-K	406,590	$54,212,000	479,190	$63,892,000	72,600	$9,680,000
Sch. 14A	555,683	$63,709,987	555,749	$74,101,862	66	$10,800
Sch. 14C	52,337	$5,951,639	52,340	$6,978,466	3	$199
Sch. TO	54,375	$21,750,000	54,375	$65,250,000	0	0
Sch. 13E-3	20,588	$24,705,000	20,588	$24,705,000	0	0
Form S-4	628,904	$754,686,601	628,904	$754,688,401	0	$1,800
No Objection Request
Reg. S-X	1	0	0	0	0	0
Reg. S-K	1	0	0	0	0	0
Reg. S-B	1	0	0	0	0	0

Table 3:

	Change Due to Adjustment in Agency Estimate
	Burden Hours	Costs
Sch. 14A	0	$10,381,079.67
Sch. 14C	0	$1,026,627.67
Sch. TO	0	$43,500,000

16. INFORMATION COLLECTIONS PLANNED FOR STATISTICAL PURPOSES

Not applicable.

17. EXPLANATION AS TO WHY EXPIRATION DATE WILL NOT BE DISPLAYED

Not applicable.

18. EXCEPTIONS TO CERTIFICATION

Not applicable.

B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable.

1 Release No. 33-8982 (Nov. 14, 2008) [73 FR 70816].

2 17 CFR 210.1-01 -- 210.12-29.

3 17 CFR 229.10 et seq.

4 17 CFR 230.400 et seq.

5 15 U.S.C. 77a et seq.

6 17 CFR 240.12b-2.

7 17 CFR 240.13e-100.

8 17 CFR 240.14d-100.

9 17 CFR 244 et seq.

10 17 CFR 249.308.

11 15 U.S.C. 78a et seq.

12 Our estimate is based in part on data published in a report on IFRS implementation in the European Union prepared by the Institute of Chartered Accountants of England and Wales (“ICAEW”). In this report, the ICAEW estimated that the typical cost incurred by a publicly traded company established in the E.U. to prepare its first IFRS consolidated financial statements was approximately 0.05% of the company’s revenue. We estimated that the cost of IFRS transition under the proposed amendments would be approximately 0.13% of revenue for the U.S. companies that would be eligible to use IFRS accounting. We used a higher percentage of revenue to take into account our different filing obligations in the U.S., which require, among other things, issuers to include three years of audited financial statements, and our requirements related to internal controls over financial reporting.

13 We assumed that 110 U.S. issuers, representing an approximate minimum number of those U.S. issuers that would be eligible to use IFRS accounting under the proposals, would elect to switch from U.S. GAAP to IFRS. This assumption is conservative, in that it is unlikely that all of those issuers would elect to file their financial statements in accordance with IFRS. We do not know the actual number of eligible issuers that would choose to switch to IFRS accounting.

14 For convenience, figures in Table 2 have been rounded to the nearest whole number.

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