SEC Chairman Christopher Cox announced the establishment of an advisory committee that will examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors.
The SEC Advisory Committee on Improvements to Financial Reporting will study the causes of complexity and recommend to the SEC 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 committee will be chaired by Robert C. Pozen, chairman of MFS Investment Management in Boston and former vice chairman of Fidelity Investments, and will include between 13 and 17 additional members with various backgrounds to be named by the SEC in the near future.
The SEC, following its proposal to eliminate the reconciliation requirement for foreign companies filing their financial statements using International Financial Reporting Standards (IFRS), also published a report about the application of IFRS based on staff reviews of annual reports from more than 100 foreign companies that reported in IFRS for the first time. To view the report and SEC staff correspondence with the companies reviewed, visit www.sec.gov/divisions/corpfin/ifrs_staffobservations.htm and www.sec.gov/divisions/ corpfin/ifrs_reviews.htm, respectively.
The Private Company Financial Reporting Committee recommended that FASB extend the effective date and make other changes to proposed FASB Staff Position no. FAS 154-a, Considering the Effects of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements .
In a letter to FASB Chairman Robert Herz, PCFRC Chairwoman Judith O’Dell recommended that the proposed FSP take effect for private company annual financial statements issued for fiscal years ending after Dec. 15, 2007. The current FSP is effective for financial statements issued for fiscal years ending after June 15, 2007. O’Dell said the delay will give statement preparers and practitioners time to become familiar with the requirements.
O’Dell also recommended removing references in the FSP to SEC Staff Accounting Bulletin No. 99, Materiality , and suggested FASB require disclosures related to the cumulative effect adjustment to include reconciliation between the previously reported opening balance and the restated opening balance. The recommendations are available at www.pcfr.org/downloads/PCFRC_Recommendations-FSP_154.pdf .
FASB is forming a resource group to provide the board input on potential clarifying guidance concerning the application of FASB Statement no. 157, Fair Value Measurements, to fair value information required or permitted under U.S. GAAP. The group’s first priority will be to help the board evaluate any known implementation issues related to 157.