NOTE: You may recognize the tune to Hey There Bob Pozen, as a song parody of Hey There Delilah by the Plain White T’s. You may also recognize some of the scenes of the Pozen committee from the SEC’s public webcasts. DISCLAIMER 1: please note the SEC had nothing to do with the production of this music video and has not been asked to opine on it, nor has any other standard-setting body or individual. DISCLAIMER 2: Please refer to the FEI blog’s disclaimer, posted on the right side of our blog.For those of you who like to singalong, we'll be posting a link to the full lyrics in an update at the bottom of this post, as well as on our youtube page, check back later today.
BACKGROUND ON THE POZEN COMMITTEE
As noted in the SEC’s June 27, 2007 press release announcing the formation of the Pozen committee, established by the SEC under the Federal Advisory Committee Act (FACA), the committee was formed to:
...examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors…[and to]... study the causes of complexity and recommend to the Commission how to make financial reports clearer and more beneficial to investors, reduce costs and unnecessary burdens for preparers, and better utilize advances in technology to enhance all aspects of financial reporting.
The June 27, 2007 press release noted the selection of Robert C. (Bob) Pozen to chair the advisory committee. The committee included a broad range of the SEC’s constituents (investors, preparers, auditors and others) as noted in the SEC’s July 31, 2007 press release listing committee members (see also bios). The Chairmen of the FASB, PCAOB, IFRS Foundation, and a representative from the U.S. Treasury Department participated in this high-level committee as observers.
The detailed deliberations of the Pozen committee during its one-year existence from July 2007 to July 2008, culminated in the issuance of a final report and recommendations on August 1, 2008. Materials relating to the Pozen committee (interim reports and reports of its subcommittees, press releases and archived webcasts) can be found on the SEC’s Spotlight page on the Pozen Committee (CIFiR).
RECOMMENDATIONS OF POZEN COMMITTEE
In ‘plain English,’ the recommendations were summarized in the SEC’s August 1, 2008 press release, and under “Key Recommendations” in the Executive Summary of the committee’s final report as follows:
A. Increasing the usefulness of information in SEC reports
B. Enhancing the accounting standards-setting process
C. Improving the substantive design of new accounting standards
D. Delineating authoritative interpretive guidance
E. Clarifying guidance on financial restatements and accounting judgments
INFLUENCE OF POZEN COMMITTEE
The SEC, PCAOB and FASB (as well as related private sector efforts) have implemented, directly and indirectly, numerous recommendations of the Pozen Committee. To name but a few, these include:
- Increasing investor participation in FASB and the FAF
- Launching of Post-Implementation Review by FASB
- SEC’s “Financial Reporting Series” to begin this year, in which SEC will host a series of public roundtables on important topics in financial reporting, with cross-section of constituents participating
- SEC interpretive guidance to increased ability of companies to provide information required by the SEC via various forms of electronic media
- Phasing in eXtensible Business Reporting Language (XBRL) requirements in SEC reports
- Professional judgment: although the SEC and PCAOB have not issued ‘rules’ or ‘standards’ per se on what constitutes professional judgment by preparers or auditors, respectively, various members of the SEC staff have referred to the Pozen committee’s recommendations as useful guidance. For example, during a press session at FEI’s Current Financial Reporting Issues Conference in November, 2009 SEC Chief Accountant Jim Kroeker said: :Regardless whether there is any more formal action on a judgment framework [that the points outlined by CIFiR are] the kinds of things we look for in the preclearance process [in the Office of the Chief Accountant], and in the Corp Fin comment process." (See info about our upcoming 30th anniversary Current Financial Reporting Issues Conference, Nov. 14-15, 2011 in NYC.)
WHAT WILL THE FUTURE HOLD?
In addition to the diligent efforts of the standard-setters, rule-makers, their advisory committees, and the private sector to avoid unnecessary complexity if possible, particularly through enhanced outreach, post-implementation review, and other methods, some say there is more ground that can be covered in addressing complexity head-on.
For instance, audit firm PwC released a “Point of View” report last month, entitled “Reducing Complexity,”
The topic of improving financial reporting, reducing unnecessary complexity in financial reporting, and making financial reporting more understandable and useful will always be an important topic to financial professionals, whether preparers, auditors, investors, academics, students, regulators, or others, and as we have seen during the Sarbanes-Oxley and Dodd-Frank legislation, to our elected officials as well.
Hey There Bob Pozen, Here's To You, Your Committee and Observers Too
We’d like to take the opportunity on this 3rd anniversary of the Pozen committee report to thank the members of the committee (and their observers and staff) for their dedication to the goal of improving financial reporting and reducing complexity, and to note the Pozen committee report can continue to serve as a useful reference in this endeavor.
Here's to our production team!
I'd like to thank our production team, Steven Zelin, "The Singing CPA," Glenora (Glennie) Blackshire (videographer), Rob Taube, (audio recording engineer). Thanks also to Lili Devita at FEI and the rest of the marketing team (Tish Ysambart and Doug Hoekstra), and my personal thanks to Merrill Reich.