Kudos to CIFiR for reducing complexity for readers of its 180-page report by providing a 10 page “Compendium of Recommendations” in the Executive Summary.
Following their July 11 meeting, there will be a teleconference on July 31 at which CIFiR will vote on issuing its final report to the SEC. According to its charter, the committee will terminate on August 2nd. Further background on CIFiR’s previous deliberations can be found here, here, here, here, here, here, here, here, here and here.
Securities Act of 2008 Reportedly Will Include Provision on Complexity
Today’s Wall Street Journal (“SEC’s Reach is at Heart of Bill”) reports that the Securities Act of 2008 being considered by Congress would provide new authority to the SEC in certain enforcement areas and would ‘impose few new restrictions on the SEC, other than calling for its chairman to give annual testimony on efforts to reduce complexity in financial reporting.”
Indeed, the House Capital Markets Subcommittee is slated to consider the Securities Act of 2008 during a committee markup on July 9.
Based on the description of the Securities Act of 2008 in the Wall Street Journal, it appears it will incorporate a bill originally proposed by Cong. Geoff Davis in 2006 as H.R. 5024, the Promoting Transparency in Financial Reporting Act of 2006, reintroduced by Davis in 2007 as H.R. 755, and passed unanimously by the House on Feb. 28, 2007. The bill was introduced in the Senate last year as S. 834 by Sen. Orrin Hatch; as far as I know it remained in the Senate Banking Committee.
As described in this press release issued by Cong. Davis in 2007, the ‘promoting transparency’/’reducing complexity’ bill passed by the House in 2007 would have required the chairman of the SEC - and the chairmen of FASB, PCAOB; in the bill currently before the House, the Securities Act of 2008, I’m not sure if it will reach to FASB, PCAOB chairmen as well - to provide annual testimony (for a 5 year period) to the House Financial Services committee (with a similar provision in Hatch’s bill requiring annual testimony to the Senate Banking Committee) on SEC’s (and possibly FASB and PCAOB’s) efforts in:
- Reassessing complex and outdated accounting standards;
- Improving the understandability, consistency, and overall usability of the existing accounting and auditing literature;
- Developing principles-based accounting standards;
- Encouraging the use and acceptance of interactive data;
- Promoting disclosures in “plain English.”
If called upon to testify as set forth in the bullets above, the SEC would have a lot to talk about in terms of CIFiR’s deliberations – although putting CIFiR’s recommendations into action is another step to be taken involving action by standard setters and other stakeholders in the financial reporting process. The SEC would also be able to reference its proposed rule that would mandate interactive data reporting in XBRL (comment deadline Aug. 15), and its recently announced ‘21st Century Disclosure Initiative’ featuring one of the ‘gurus’ of plain English, Dr. Bill Lutz.
Treasury ACAP Receives Comment Letters from FEI, Others as July 9 Deadline Approaches
The pace of comment letters filed on the U.S. Treasury Department Advisory Committee on the Auditing Profession’s (ACAP) Draft Report and Addendum has picked up recently in light of the June 13 comment deadline on the Draft Report, and July 9 deadline on the Addendum. As a practical matter, many letters are being filed on the two documents simultaneously.
ACAPs recommendations aimed at improving the sustainability of the auditing profession address areas including human capital (including education, diversity, recruitment and retention), audit firm structure and finances, and concentration and competition. The ‘elephant in the room’ which some observers claim was not addressed sufficiently by ACAP (although a sub-issue of court jurisdiction is addressed in the Addendum) is the issue of potential catastrophic liability that could put an audit firm out of business.
FEI’s Committee on Corporate Reporting (CCR) filed its comment letter on ACAP’s Draft Report and Addendum on July 3. The FEI letter was signed by CCR Chairman Arnold Hanish.
Other comment letters filed with ACAP in the past week include those of the six largest accounting firms, the Center for Audit Quality (CAQ), and the Ethics Resource Center.
See our previous coverage of ACAP here, here, here and here.
Print this post