Among the provisions of the Dodd-Frank Act are mandated disclosure rules, passed by the Securities and Exchange Commission in August 2012, about the use of “conflict minerals”. The term “conflict minerals” is used to describe certain minerals—tantalum, tungsten, tin, and gold—that are mined in the Democratic Republic of the Congo (DRC) or the surrounding areas. Federal law does not prohibit companies from sourcing conflict minerals, nor impose a penalty for doing so. However, the intent is to rely on public pressure to dissuade U.S. companies from indirectly sourcing conflict minerals, and hence fund the armed groups in the DRC.
The SEC final rule requires issuers who use conflict minerals in their manufacturing processes and supply chain to disclose whether the minerals came from the DRC or the surrounding areas. Under the rule, if a company determines its conflict minerals originated in those countries, it will have to file a “Conflict Minerals Report” with the SEC and publish it on its website. The reports, which will outline to the SEC all of the due diligence the company performed as it sourced its supply chain, must be independently audited.
The provision specifically mandates three steps for companies to follow:
- Determine if tin, tungsten, tantalum and gold are used to make its products.
- Determine if the metals they use originated in the DRC or neighboring countries. If the metals did not originate in affected nations, companies must report how the company determined the metals’ origins.
- If the metals were from DRC or adjoining countries—or the source is unknown—companies must trace the supply chain for the source and furnish “Conflict Minerals Report” (CMR) on those due-diligence efforts
Under the rule, companies will file their first specialized disclosure report on May 31, 2014, for the 2013 calendar year and on May 31 in subsequent years.
Independent Private Sector Audit (IPSA)
The purpose of the IPSA is to express an opinion or conclusion as to: (1) whether the design of the issuer’s due diligence framework as set forth in the Conflict Minerals Report is in conformity with, in all material respects, the criteria set forth in the nationally or internationally recognized due diligence framework used by the issuer, and (2) whether the issuer’s description of the due diligence measures it performed as set forth in the Conflict Minerals Report is consistent with the due diligence process that the issuer undertook.
The independent private sector audit is required to be performed in accordance with the “Yellow Book” and can consist of either an examination attestation engagement or a performance audit.
The AICPA has convened a task force to provide practitioners with guidance relating to the IPSA.
Rules, Frameworks, and Other Tools
Articles and Other Resources
- Congressional Hearing on Conflict Minerals, May 21, 2013
- The Economist, "Murky Minerals," May 2013
- Journal of Accountancy, "Build a Strong Team to Comply with Conflict Minerals Rule," December 2012
- Fordham Law Review, Conflict Minerals Legislation: The SEC’s New Role as Diplomatic and Humanitarian Watchdog, December 2012
- Journal of Accountancy, Financial Accounting News Digest, November 2012
- SEC adopts rule for disclosing use of conflict minerals, August 22, 2012
For more information on the AICPA's involvement with the issues surrounding Conflict Minerals, contact Ahava Goldman at email@example.com or 212-596-6056.