European companies are closing their books faster and — with a little help from Congress — gaining on their U.S. counterparts. In the years since Sarbanes-Oxley passed, the gap has tightened between European and U.S. company financial closing times: U.S. businesses still lead their European counterparts by nine days, but that lead has been cut by more than two-thirds in the past three years, says a report by BPM International.
In 2006, the average time U.S. companies took to sign off and file with securities regulators was 55 days, compared with 60 in the United Kingdom and 64 in Europe. Three years ago, those numbers were much different, giving the United States a 20-day lead over the United Kingdom and a 26-day lead over Europe.
More than half of the companies in the Financial Times Stock Exchange 100 have significantly reduced their reporting timetables, according to BPM, a consultancy network with members throughout Europe and the United Kingdom. The time it takes them to report has fallen by an average of four days over the past three years. Imperial Tobacco, AstraZeneca, and British Sky Broadcasting have turned around the fastest audited results: in 32, 33, and 34 days, respectively.
Even as it praises the progress of European firms, BPM speculates that Sarbanes-Oxley is “draining away” U.S. companies’ competitive advantage. “This trend is even more impressive given the pressures for British and European corporations to move to International Financial Reporting Standards and the need for 20 percent of the European companies we studied to prepare for Sarbanes-Oxley compliance themselves from next year,” David Jones, chairman of BPM, said in a press release. “At the same time, U.S. companies appear to have been hit very hard by the new regulations introduced by Sarbanes-Oxley and the SEC.”
BPM compared the close cycles of 527 companies in seven countries, including the United States, during the past three years. The 100 largest U.S. companies took an average of 28 days to report their year-end results. In fact, more than 70 percent of these companies had submitted their report by the time their British counterparts went to make their submissions. The U.S. companies that reported within 20 days include Alcoa, Cisco, Dell Computer, Genentech, General Electric, Hewlett-Packard, IBM, J.P. Morgan Chase, Lehmann Brothers, Motorola, and Pfizer.