Deloitte & Touche LLP
Ten Westport Road
Wilton, CT 06897
& Touche

May 23, 2002

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports, Release No. 33-8089; 34-45741

File No. S7-08-02

Dear Mr. Katz:

Deloitte & Touche LLP is pleased to respond to the Securities and Exchange Commission's (the "Commission") request for comments on its proposed rule regarding Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports, Release Nos. 33-8089 and 34-45741.

I. Introduction

We applaud the Commission's efforts to provide the markets with access to information that is clear, accurate, and timely. However, we believe this proposal will diminish the quality of disclosures and result in increased and unnecessary costs, without providing significant corresponding benefit to investors. Significant practical issues will also impede compliance with the accelerated due dates. We believe the current focus in the post-Enron environment should be on providing quality disclosures demanded by the market and investors Quality disclosures should not be sacrificed for accelerated timing.

Although we do not support the proposed accelerated due dates, we share the Commission's concerns about the quality of earnings announcements and their role in the financial reporting process. To combat these concerns and to lessen the information gap between a company's announcement of earnings and the filing of more extensive information in its periodic reports, we believe condensed financial information, as described in more detail below, could be filed simultaneously or shortly after an earnings announcement.

II. Time and Practical Constraints and Quality of Disclosures

We believe that the quality and breadth of disclosures will be reduced and significant practical issues with compliance will result if the due dates are accelerated. There is no doubt that new technology allows for rapid accumulation and communication of vast amounts of financial data. However, technology has not meaningfully reduced the time it takes to perform the thoughtful, reflective, and judicious analyses that are necessary to prepare meaningful disclosures about the data. In fact, the time needed to prepare the disclosures required in periodic reports has increased. And, we expect this trend to continue as a result of the increasing complexity and volume of accounting standards, investors' demands for more disclosure, and potential new Management's Discussion and Analysis ("MD&A") disclosure requirements about critical accounting policies, including disclosures to demonstrate sensitivity.

The last change in the periodic report filing dates occurred in 1970. By the end of 1970, accounting and reporting literature consisted of only six Accounting Research Bulletins and 17 Accounting Principle Board Opinions. Since that time, the Emerging Issues Task Force was created and has discussed over 425 issues. One hundred forty-five Statements of Financial Accounting Standards and 31 Accounting Principle Board Opinions have been issued today, some of which, including their interpretations, were longer than the entire body of literature existing in 1970. New SEC guidance was recently issued in Financial Release ("FR") Nos. 60 and 61 and SEC rules have been proposed regarding disclosure in MD&A about critical accounting policies. There are also proposed additional FASB standards and new auditor fraud and documentation standards. In addition, the complexity of transactions and global interdependence of companies and economies has grown by geometric proportions.

The following example illustrates that the current due dates do not provide much unnecessary time, particularly for the Form 10-Q filing. The example shows the typical timeline from quarter/year end to filing a Form 10-Q/10-K with the SEC for a large (Fortune 500) registrant.i A smaller registrant may need considerably more time.
 Days After
Quarter End

Days After
Year End

Raw data available3-6 3-15
Earnings Announcement18-2225-30
Prepare MD&A, notes andother sections of filing14-3026-42
Date of Auditors' report (completion of field work)N/A30-45
Senior Management reviews30-3242-54
Auditors, outside lawyers, investor relations review of periodic report33-3655-69
CEO reviews3769-70
Audit Committee/Board reviews37-4070-76
Formal Audit Committee and BOD meeting4177
Send filing to Printer4278
Review Edgarized version4379-80
File Form 4481

As reflected above, preparation of MD&A and other disclosure takes significant time, particularly the preparation of valuable forward-looking information and market data comparisons and other competitive information. While certain disclosures may be benefited by new information technology, such as market risk disclosure and option valuations that are computed using complex computer models, most disclosure results from an in-depth analysis and review of events by management. Investors do not benefit from reports that are long on data if they are short on analysis.

Although raw data may be available and compiled sooner, this benefit has been more than offset by the additional time required to analyze the data and prepare the required disclosures. A respondent to our surveyii indicated that it took about two additional days on FR 60 and FR 61 and one additional day on SFAS 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible Assets, disclosures. Consistent with the Commission's recent message to "Get it Right the First Time," companies are spending more time ensuring that the accounting is correct and the disclosures complete.

Respondents to our survey also indicated that the audit committee now spends more time on the 10-K and 10-Q in both the planning stages and the final review. They indicated that audit committees ask many more questions of the outside auditors as a result of increasing disclosure and accounting complexities and the increased expectations of audit committees' responsibilities and role. Over 70% of respondents believed that the proposed due dates would not provide adequate time for the board, audit committee and external auditors to perform their review functions. In a period when the role of boards of directors and audit committees is under intense scrutiny, shortening the time in which they have to perform their duties could lead to a flight of quality board members.

Acceleration of the due dates, as far as the audit profession is concerned, creates a larger capacity burden than already exists. The size and complexity of multi-national enterprises, the detail of disclosures, the requirement for timely quarterly reviews all require resources that are approaching their limits under today's requirements. Accelerating the audit or review process also creates a situation in which the likelihood of undetected errors is increased.

Other practical issues that may affect compliance include an inability to get necessary financial information from third parties, such as joint ventures and equity investees, foreign operations, and various external consultants and advisors. For example, many companies already consolidate their foreign operations on a time lag that may need to be extended if the due dates for filings are accelerated. One respondent to our survey indicated that they currently consolidate their foreign subsidiaries on the same closing calendar as the parent company but "it would be impossible for us to continue to do so" if due dates are accelerated. Companies rely on outside experts to prepare content for various MD&A and footnote disclosures, such as disclosures regarding competitive market information, pension plans, and fair value of financial instruments. These outside experts may not be able to provide the required information sooner. Another respondent to our survey stated that they "already push their outside parties to meet their current deadlines" and they "would expect shorter deadlines to be difficult for" the outside parties.

We believe quality could be compromised in a rush to beat the clock. The accelerated due dates may not allow sufficient time to prepare and confirm the accuracy of disclosures. About 85% of respondents indicated that the overall reliability and accuracy of financial reports would suffer as result of the shortened due dates. The complexity of accounting rules and the amount and depth of information that must be analyzed and disclosed creates an environment in which speed will only hurt the accuracy and reliability of financial reporting. Accelerated due dates would lead to more estimation, which would decrease the accuracy of financial statements. One respondent indicated that their timing for closing was "largely dictated by getting information from our licensees around the world" and "licensee revenue would have to be estimated" if due dates were accelerated.

We are concerned that if the rule changes are adopted as proposed that there will not be sufficient time for auditors to complete their review or audit procedures, read and comment on the increased disclosures, and communicate with management and the audit committee without significantly redesigning timing, staffing and approach. Notwithstanding the audit profession's desire for quality, there is also the very real possibility that errors will go undetected because of the rush to complete procedures so that filings may be made on a timely basis. Further, a significant number of registrants are calendar year filers. The audit profession's staffing model is already geared to meet the existing filing deadlines for these companies. For example, the month of March is one of the busiest periods for utilization of partners and professional staff. Based on the broad array of client capabilities, we are concerned about our ability as a profession to reallocate the timing of audit work needed to perform an audit under Generally Accepted Auditing Standards while maintaining the quality that investors expect. Under the proposed filing dates, we believe that there is the possibility that companies will have to file for extensions because their auditors are not in a position to complete their procedures thereby defeating the goal of the proposal.

The proposed rule would impose increased costs on issuers. Information technology systems may have to be upgraded or modified. Additional personnel may need to be hired. Outside parties that provide information and services may increase their fees to compensate for more timely service. One respondent to our survey indicated that "modifications to the financial reporting system could easily exceed $1 million." Another indicated that systems improvements and an increase of accounting staff of 4-5 people would be necessary at a cost of approximately $1 million. The hiring of temporary accounting personnel at peak periods was not considered practical since there would be no time for training and mistakes that would likely result from inexperienced and untrained staff. Companies who cannot afford these increased costs, particularly in the current economic environment that has caused many registrants to reduce staffing, would be forced to stretch their current resources and potentially sacrifice quality.

We believe that now is not the time to make changes to the reporting deadlines. In this post-Enron environment, transparent and complete disclosure is more important than ever as companies try to deal with the proliferation of new accounting and disclosure rules and guidance. The post-Enron environment has further strained the resources of national accounting firms as an unprecedented number of registrants are changing or anticipate changing their current auditors. The focus should first be on quality disclosures and second on timeliness.

III. Our Recommendation

For the reasons presented above, we do not believe the due dates for either the Form 10-K or 10-Q should be accelerated. However, we agree with the Commission's concern that "…earnings announcements are generally less complete in their disclosure than quarterly or annual reports and can emphasize information that is less prominent in quarterly or annual reports…" and "the amount of information and the manner of its presentation in press releases varies from company to company." We believe the depth and quality of information in earnings releases can be improved. Because of the Commission's concerns and to shorten the gap between the time a company announces earnings and files more extensive information in its periodic reports, we believe that registrants should file condensed financial statement information prepared in accordance with Generally Accepted Accounting Principles (GAAP) simultaneously with or a few days after their earnings release. The filing should also contain the actual press release or information similar to that disclosed in the press release. The filing should be prepared in a user-friendly format. The Commission could require that this abbreviated financial information be filed under Form 8-K (for example, under Item 9. Regulation FD Disclosureiii or some other periodic form. In addition, companies should consider posting this information on their website if they have one.

This information ("abbreviated GAAP financial information") would consist of condensed balance sheet, and statements of operations and cash flows information prepared at a level of detail less than that required by Article 10 of Regulation S-X. The information would not be required to be reviewed or audited. A full MD&A prepared in accordance with Item 303 of Regulation S-K would also not be required. However, meaningful information provided in the earnings release and conference calls with the investment community that follow the press release should be provided in the filing. Providing this type of useable information to investors on a timely basis is more likely to improve the flow of information than merely accelerating the delivery of extensive historical information by 15 or 30 days.

IV. Alternatives Considered

We considered other alternatives in addition to our recommendation described above. If the Commission were to chose an alternative to our recommendation, we believe the next best alternative is to accelerate the due date for Form 10-K to 75 days and leave the Form 10-Q due date unchanged. We believe accelerated due dates could be more problematic for Form 10-Q than Form 10-K. Although the Form 10-K requires more extensive disclosures and an audit, investors increasing focus on current quarterly information mandates robust, complete quarterly reporting. Less than 10% of the respondents to our survey indicated that the Form 10-Q due date should be accelerated while about 25% of respondents believed that the Form 10-K due date should be accelerated. In addition, the timeline from quarter/year end to filing date, presented above, and our discussions with companies suggest that many companies can perform the thoughtful analysis required and file the Form 10-K several days before the current due date.

Every quarter companies must compare their current results to prior periods, trends, planned performance, competitors' performance and industry benchmarks. If the due date for Form 10-Q is shortened to only 30 days, companies may not have adequate time to make such comparisons, particularly considering that they must wait for competitors' results and industry results to be available in order to provide the valuable competitive information sought after by the market. However, we do believe that a 15-day acceleration for the Form 10-K rather than a 30 day acceleration, a third of the total current time allotted, would provide for more timely reporting without unnecessarily compromising disclosure quality and still allow for the various review processes involving management, the audit committee, auditors, outside lawyers, and others to be completed. There would have to be an adequate transition period provided to allow all parties to make the necessary adjustments in their processes in an orderly, thoughtful manner.

We also considered linking the due date of periodic reports to the earnings release dates. Under this alternative, companies would file their reports by the earlier of the current due dates or a specified date after the company's first release of earnings. We rejected that alternative because it did not seem practical for the reasons discussed below. However, if the Commission decides to base the due date off of the earnings release, we would recommend that the due date for filing a Form 10-Q be the earlier of 45 days after the quarter end or 20 days after a quarterly earnings release and the due date for a Form 10-K be the earlier of 90 days after the end of the year or 45 days after the annual earnings release.

One of the practical issues with linking the filing date to the earnings release date is defining what constitutes an "earnings release." Is the release of "partial" earnings information (for example, revenues, expenses, income from operations) considered an "earnings release" or does only "complete" earnings information through net income and earnings per share constitute an earnings release? A company may pre-release earnings information, such as revenues, if they expect the information to be materially different than the forecasted information that was previously publicly disclosed. Companies may also provide partial earnings releases such as, for example, income from continuing operations before equity earnings because of a delay in the receipt of earnings information from a significant equity investee. Companies may be encouraged to file incomplete earnings releases if only the filing of a complete earnings release triggers a periodic report to be filed by a certain due date. Since companies will have unique facts and circumstances that could cause them to release partial earnings information, it would be difficult to provide "bright line" guidance on what constitutes a complete earnings release. Significant judgment may be necessary and inconsistencies could develop.

Another practical issue is the variability of the due dates of the periodic reports may be confusing. Due dates will be different not only from company to company but also for a specific company from one year or quarter to the next. In addition, monitoring regulatory compliance and a company's status as a timely filer will be more difficult and time consuming.

V. Other Issues and Questions Considered

Extension Periods

The Commission has asked whether the current filing extension periods are sufficient or should be shortened. We do not believe that shortened periods of less than 15 and 5 days for a Form 10-K and Form 10-Q, respectively, would provide companies with enough time to be useful. If in fact the Commission accelerates the due dates, we believe consideration should be given to providing longer extension periods since companies will invariably have more difficulty meeting the accelerated due dates.

Financial Statement Due Dates for Acquired Businesses

The Commission has asked whether similar revisions should be made to the financial statement filing requirements in Item 7 of Form 8-K (that is, reducing the filing deadlines by one-third from 60 to 40 days.) We do not believe the filing deadlines should be changed. We believe it would be impracticable in many cases to complete the audit of the acquired business within the shortened due date since the audit is generally not even started until after the actual closing of the transaction. The additional substantial costs incurred would not seem to justify the benefit of providing financial statements of an acquired business sooner. We also note that many companies whose financial statements are required under Rule 3-05 of Regulation S-X are private and would not meet the definition of an accelerated filer.

Foreign Private Issuer Due Dates

The Commission has asked whether the current six month deadline for annual reports on Form 20-F should be shortened to five months or four months after the end of the company's fiscal year. If the due dates for domestic issuers are accelerated, we believe the Commission should also consider shortening the due dates for foreign private issuers. There is already a significant gap between the six month due date for foreign private issuers and the 90 day due date for domestic issuers and this gap would widen if the due dates are accelerated. The technological advances experienced by domestic issuers have also similarly benefited foreign private issuers so it seems reasonable to not increase the already existing gap between due dates for foreign private and domestic issuers. A narrowing of the gap between the due dates would be consistent with the Commission's recently adopted rules that will require foreign companies to file their reports on EDGAR. In this rule, the Commission stated that "because of these advances, the Commission believes that the investing public has come to expect to be able to access electronically information about public companies, regardless of their country of origin..." Similarly, regardless of a company's country of origin, investors expect timely information. If the due date for Forms 20-F is shortened, we believe that the filing date should be shortened to 5 months, effective with Forms 20-F filed after the year ended March 31, 2003. This due date should be maintained for two years and then dropped to 4 months thereafter.

Website Access to Information

We share the Commission's view that widespread access to timely corporate information promotes the efficient functioning of the secondary markets by enabling investors to make informed investment and voting decisions. We agree that an efficient and economical method for companies to make information available to investors is through their website, and we recognize that a substantial number of companies already provide access to their Commission filings through their websites. Therefore, we believe that all registrants should disclose in their annual reports where investors can obtain access to company filings, including whether the company provides access to its reports on Form 10-K, 10-Q and 8-K on its Internet website, free of charge, as soon as reasonably practicable, and in any event on the same day as, those reports are electronically filed with or furnished to the Commission.


Finally, if the Commission adopts accelerated due dates, we believe that the proposed transition period (that is, effective as of the end of accelerated filers' first fiscal year ending after October 31, 2002) does not provide companies with sufficient time to prepare for the transition to shortened due dates. To meet the accelerated due dates, companies will need to modify or upgrade information technology systems and hire and train additional employees. Audit firms will need time to revise interim review and audit scheduling. Other third parties relied upon will have to make the operational changes required to provide their services sooner. We recommend that any changes not be effective before, at the earliest, Forms 10-K filed for fiscal years beginning after December 15, 2002 to allow companies, auditors and other third parties to implement the necessary systems, staffing and review and audit planning.

VI. Conclusion

For the reasons presented above, we believe the Commission should not accelerate the current due dates for Forms 10-K or 10-Q. Quality must be balanced with timeliness and not unnecessarily sacrificed to provide quicker information. In addition, we believe that a multitude of practical and timing concerns may hinder companies' compliance with the accelerated due dates. However, we do support the Commission's efforts to improve the earnings release process and believe our recommendation to file abbreviated GAAP financial information should be considered.

If you have any questions, please contact John Wolfson at (203) 761-3741 or Christine Davine at (202) 879-4905.

Very truly yours,

/s/ Deloitte & Touche


i Example based on discussions with numerous large SEC registrants, an analysis of the largest 25 companies on the Fortune 500, and our survey discussed in footnote 2 below.
ii We surveyed thirty-six registrants (thirty of which have a market capitalization over $75 million) requesting comments on a series of questions about the proposed rule. We were unable to conduct a more complete poll as we were constrained by the 30 day response period.
iii Similar to information filed under Item 9 on FD disclosure, this information would not be incorporated by reference into a registration statement.