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The Morning Ledger: New Internal Control Standards Deadline Passes Unmarked, for Some

DOW JONES & COMPANY, INC. 6:14 AM ET 3/3/2015

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The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: [e-mail]. Get The Morning Ledger emailed to you each weekday morning by clicking http://on.wsj.com/TheMorningLedgerSignup . Follow us on Twitter @CFOJournal.

Good morning. New standards for internal controls took effect late last year, but you wouldn't know it from the regulatory filings of more than 300 companies, CFO Journal'sMaxwell Murphy reports. Those firms are still using the internal-control guidelines that were written more than two decades ago, and the number of laggards is expected to climb as more companies close their books on 2014 and disclose whether they have made the switch.

For the new standards, the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, added 17 related principles to the original set of five that were released in 1992. The new standards require companies to disclose more details about how they design and test their internal controls, which could range from requiring that two people sign off on purchasing orders to restricting access to sales systems.

"If you don't have a good business reason for not making the move...that may be indicative" that management hasn't put enough emphasis on controls, said Chuck Landes, a COSO board member. Has your firm made the switch? Let us know why.

CFO JOURNAL TODAY

Credit tightens a bit for junk-rated firms. Loans on the balance sheets of highly indebted borrowers totaled $829.9 billion in mid-February, down from $832.4 billion in late December, when the market for the loans peaked, CFO Journal'sVipal Monga reports. The dropoff this year coincides with a crackdown by banking regulators.

THE DAY AHEAD

Smith & Wesson's (SWHC) value is fully loaded. After a run-up in Smith & Wesson Holding Corp.(SWHC) shares, investors considering buying in now would be right to hold their fire, Ahead of the Tape's Spencer Jakab reports. The company releases results Tuesday for the fiscal quarter ended in January.

CORPORATE NEWS

Nasdaq parties like it's 2000, but more sedately. The tech-heavy index is on a run again, nearly quadrupling in value during a six-year bull market that began in 2009; however, this isn't your father's Nasdaq. The Nasdaq hitting 5000 will bring painful memories to mind. But 2015 is vastly different from 2000, in mostly good ways.

What the Supreme Court challenge means for the health-care law. The Supreme Court on Wednesday will hear oral arguments on a challenge to subsidies received by millions of Americans who purchased health insurance through a federally run exchange. A weakened law might remove the threat of fines for some employers who don't provide insurance to employees. Supporters of the law say a win for the plaintiffs would leave millions more people uninsured by making their premiums unaffordable.

Costco names Citi, Visa as credit partners. Costco Wholesale Corp.(COST) named Citigroup Inc.(C) and Visa Inc.(V) as its new credit partners, replacing American Express Co. as the exclusive network at its stores beginning in April of next year. The deal will expand the type of plastic that is accepted at the chain.

ARCP shares rise after probe results released. The results of an internal investigation into accounting irregularities at American Realty Capital Properties Inc.(ARCP) came as a relief to shareholders, as the troubled real-estate investment trust reported a clean bill of health for its property portfolio.

Zuckerberg moves to mend fences with telecom industry. Facing criticism from telecom carriers that Facebook Inc.(FB) is hurting their business models, CEO Mark Zuckerberg struck a conciliatory tone at the industry's main annual conference in Barcelona. Mr. Zuckerberg said the only way to expand Internet access around the world is if carriers' revenue grows too, noting "it's expensive work." The remarks appeared to address concerns that Mr. Zuckerberg's campaign to extend Web access to billions more people is at odds with Facebook(FB) services that undermine operators' revenue from phone calls and texts.

Carlyle, Warburg to challenge ratings firms. Officials with private-equity firms Carlyle Group LP(CG) and Warburg Pincus LLC say they hope to create a credible challenge to the three largest U.S. ratings agencies with their purchase this week of Canadian rater DBRS Ltd. The new owners hope to double or triple DBRS's industry share over the next five to 10 years.

Wynn Resorts (WYNN) seeks to block Elaine Wynn from board. Wynn Resorts Ltd.(WYNN) is seeking to block Elaine Wynn--a major shareholder, longtime director and the ex-wife of company Chairman Steve Wynn--from its board. The board said a committee cited concerns about Ms. Wynn, including: a lawsuit she filed against Mr. Wynn to remove restrictions on her shares; "actual or potential conflicts of interest"; and her "lack of independence under Nasdaq listing standards and resulting inability to serve on key board committees."

Springleaf nears deal for Citigroup's(C) OneMain. Lender Springleaf Holdings Inc. is nearing a deal to buy Citigroup Inc.'s(C) OneMain Financial for about $4.25 billion, a purchase that would create a new U.S. subprime giant. Getting rid of the OneMain unit has long been a goal for Citigroup(C).

NXP Semiconductor bets $12 billion on smarter cars. NXP Semiconductor Inc. stepped on the gas in the race to supply chips to make smarter cars by agreeing to buy Freescale Semiconductor Inc. for nearly $12 billion. The purchase would vault NXP to No. 1 supplier of chips for cars. Gartner Inc. estimated world-wide revenue for automotive chips at about $ 29.2 billion last year, up 9% from 2013. Newer cars incorporate as many as 100 chips controlling braking, dashboard displays, fuel injection and backup cameras.

IBM (IBM) shareholder sues company, alleging it overvalued chip unit . One International Business Machines Corp.(IBM) shareholder has brought suit against the company claiming "it committed securities fraud by failing to write down a money-losing semiconductor unit before agreeing to pay another company $1.5 billion to take that unit off its hands," according to a Reuters report.

Microsoft (MSFT) plays waiting game in smartphone race . Microsoft Corp.'s(MSFT) success shifting to a multiplatform-friendly, open-source-accepting type of place hasn't translated into better mobile sales. The company's share of smartphones shipped last year slipped to 2.7% from 3.3% in 2013. Microsoft(MSFT) critics say that the company is stuck in no-man's-land, between Apple Inc.'s high-end smartphones and Android-powered devices. Stephen Elop, who oversees Microsoft's(MSFT) device group, says the company plans to deliver a new flagship Windows phone running Windows 10 by year-end.

Google (GOOG) confirms plan to offer wireless service . Google Inc. will launch a small U.S. wireless service using network infrastructure and services provided by Sprint Corp. and T-Mobile US Inc. The company said the service will not compete with the big four, but the company has challenged industry giants before with small-scale projects, most recently its high-speed Internet service. Sundar Pichai, who oversees Google's(GOOG) mobile operating system Android, said the approach will be similar to one Google(GOOG) adopted with its Nexus phones, which the company uses to demonstrate its vision for how Android should operate, even as the vast majority of Android phones are sold by other manufacturers.

NTT buys Germany's E-shelter as data competition intensifies. NTT, the world's largest telecom company by sales, agreed to acquire a majority stake in German data center provider E-shelter, amid an intensifying competitive landscape for data storage and services in Europe, the Financial Times reports. The deal follows last month's announcement that Telecity would buy competitor Interxion.

REGULATION

Foreign banks brace for Fed stress tests. The Federal Reserve's growing scrutiny of global banks has set off a scramble among foreign firms as they staff up and revamp operations to meet the central bank's rising expectations. The stress tests are expected to find shortcomings in risk management at the U.S. units of some foreign banks, including Deutsche Bank AG and Banco Santander SA.

Fake orders raise scrutiny on Alibaba(BABA). Some merchants are using fake orders to boost their standing on Alibaba Group Holding Ltd.'s(BABA) websites, a practice that puts the Chinese e-commerce giant at risk of further regulatory scrutiny. Meanwhile, Taiwan has ordered Alibaba(BABA) to withdraw from the country within six months, the Financial Times reports, because the online retailer had violated investment rules required for a Chinese company.

Securities regulator, police unite enforcement in Canada. Canada's biggest securities regulator and the country's national police force said they plan to combine enforcement teams under one roof to further clamp down on financial fraud. The Royal Canadian Mounted Police will move its 28-person Integrated Market Enforcement Team into the Ontario Securities Commission's headquarters in April.

FHFA puts new rules on delinquent loan sales. A top federal housing regulator said it would impose new rules on investors who want to buy delinquent loans backed by Fannie Mae and Freddie Mac. The Federal Housing Finance Agency set new rules that require investors who take over delinquent mortgages backed by the two agencies to try harder to reach agreements that let borrowers keep their homes before kicking them out.

Tax audits of many businesses get less frequent. Tax audits of many businesses are growing less frequent, the Internal Revenue Service said Monday, citing a continuing budget squeeze at the agency. The number of audits of large corporations was 20% lower in fiscal 2014 than the previous year.

SEC plans to level playing field for newer ETF firms . Established exchange-traded-fund operators such as BlackRock Inc. and Vanguard Group may lose their leg-up on younger ETF competitors, Reuters reported. "The [Securities and Exchange Commission]'s tentative plan...may result in allowing the likes of Schwab to compete better with their older rivals," the report said.

GASB finalizes fair value measurement guidance for state and local governments . "The Governmental Accounting Standards Board has released finalized guidance...primarily applying to investments made by state and local governments," Accounting Today reported. "Under the new statement, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date," the report said.

Crude on derailed train contained high level of gas. The crude oil aboard the train that derailed and exploded two weeks ago in West Virginia contained combustible gas exceeding the new cap that goes into effect next month. Oil producers that don't treat their crude prior to transport will face fines and possible civil or criminal penalties after North Dakota imposes limits in April.

Private Company Council under the microscope . The Private Company Council, the Financial Accounting Foundation's arm for "setting standards for private companies" is being evaluated three years since its inception, Accounting Today reported. "The assessment is supposed to help the trustees determine whether the PCC is fulfilling its mission and meeting its primary objectives, and whether they should make any changes in the PCC's structure that would improve the PCC's effectiveness," according to the report.

ECONOMY

Manufacturing slowed in February. U.S. manufacturers are experiencing a slowdown in the first quarter, but that might reflect a temporary drag from the West Coast port slowdown, not a shift in demand. The Institute for Supply Management said Monday that the ports labor strife pulled down its top-line purchasing managers' index to 52.9 last month, from 53.5 in January. It was the fourth monthly decline, but still reflects a sector in expansion.

Savings at the pump become savings at the bank. Cheaper gas has given many Americans a cash infusion. But much of the extra money has been going to savings or debt reduction, not shopping. The national saving rate has climbed a full percentage point since November to 5.5% in January, roughly twice the rate before the recession.

Eurozone economy firms ahead of ECB bond buying. The decline in consumer prices moderated in Europe last month while unemployment fell to its lowest rate in nearly three years, an indication that the region's economy is firming ahead of the ECB bond buying program.

Greece faces cash crunch. Greece faces a cash crunch in the coming weeks with little hope of financial help soon from the rest of the eurozone, threatening a serious blow to the country's fragile economy. Athens could face trouble paying its bills before the end of March.

Ukraine edges closer to IMF bailout as economy teeters. Lawmakers passed austerity measures intended to help secure a fresh bailout from the International Monetary Fund, as the United Nations reported a new death toll from the conflict with Russia-backed rebels.

CFO MOVES

DDR Corp., a Beachwood, Ohio-based real-estate investment trust, named Luke Petherbridge chief financial officer. Mr. Petherbridge was previously an executive vice president of capital markets and treasurer at the company. He succeeds David Oakes, who has retained the CFO position since his promotion to chief executive officer in February, according to a regulatory filing. Mr. Oakes received compensation valued at $3.5 million in 2013, according to a proxy filing.

EZCorp Inc. (EZPW), an Austin, Texas-based loans company, named Mark Ashby CFO, expected to be effective in June. Mr. Ashby has most recently been CFO at Myer Holdings Ltd., which additionally announced the resignation of its CEO, according to a news release. Mr. Ashby succeeds CFO Mark Kuchenrither, whom EZCorp(EZPW) had additionally named president and CEO, effective last August, according to a regulatory filing. Mr. Kuchenrither received compensation valued at $1.2 million during the company's 2014 fiscal year, according to an annual report.

Scania AB, the Sweden-based truck division of German automaker Volkswagen AG, named Johan Haeggman CFO, effective Apr. 1. Mr. Haeggman is a senior vice president and head of corporate control at Scania. He will succeed Jan Ytterberg, whose choice to depart the company announced last month, according to a news release.

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03-03-150614ET
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