Acquisition of a new Company 2240

  • A UK Company, owned wholly by a US Parent, acquires another UK Company with no US interests. How quickly post acquisition must we be able to demonstrate their compliance with SOX?

  • How material is the new company to the consolidated US company? Generally, you are not required to test controls of the acquired entity in the year that they are acquired, but must include them (if significant to the consolidated business) in subsequesnt years.

  • The acquisition will more than double the size of the UK company.

  • The size of the UK company does not necessarily drive the decision - the relative size of the acquired company to the consolidated US company and the relative impact on the consolidated financials will drive the decision as to whether or not the new company should be in scope.

  • Despite the acquisition more than doubling the size of the UK operation we will still be relatively insignificant in relation to the US Parent. One would logically expect there to be a period of grace of a year following the acquisition in which to integrate our SOX controls to the acquired business - which fits with your response. many thanks

  • From a SOX compliance perspective, you probably would have a one year grace period. Your parent company may think differently and have a more aggressive timeframe in mind, though.

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