Poor IT integration blocks compliance

Two out of five US multinational companies will have to make significant changes to their IT infrastructure in order to meet corporate reporting requirements.

Unless they do this, they will be unable to meet the new deadlines for reports required quarterly and annually by the Securities and Exchange Commission (SEC), according to consultancy PricewaterhouseCoopers (PwC).

Stringent SEC rules being phased in over the next two financial years will cut the time companies have to file these reports. The time allowed for filing quarterly reports has been reduced from 45 days to 35 days, with annual reports needing to be filed 60 days after year-end rather than the original 90 days.

PCW also found that nearly half of the 177 executives surveyed admitted they expect their companies to encounter problems meeting the requirements. More than 20 per cent cited ineffective IT infrastructures with poorly integrated systems as one of their biggest anticipated problems.

Only 28 per cent of large companies surveyed by PwC use an almost entirely automated closing and reporting process, while 45 per cent need to manually supplement their system's outputs. Some 22 per cent still have substantial parts of their closing process that are not automated.

To meet the more stringent regulations, 59 per cent of firms responding to the PwC research said they would try to use their existing financial reporting systems more effectively, while 29 per cent expected to upgrade their reporting systems.

But only eight per cent of companies said they intended to make significant investments in IT.

"Companies will need faster and better-managed month-end closing procedures to meet the new timetables," said PwC partner, Tom Watson, in a statement.