Watch for SEC Guidance Affecting 2001 Reports
The SEC petition is the first in a series of steps planned by the Big 5 in response to the Enron collapse and resulting loss of public confidence in financial reporting. A second step under consideration is a follow-on petition that would urge the Commission to set rules for the minimum disclosure requirements for the three areas addressed in the draft interpretive release:
(1) liquidity and capital resources, including off-balance sheet arrangements,
(2) trading activities involving non-exchange traded contracts, and
(3) related party transactions, including relationships and transactions on terms that would not be available from clearly independent third parties.
SEC Chief Accountant Robert K. Herdman said the SEC staff intends to study the petition on an expedited basis, and it expects to make recommendations for consideration by the Commission. “Whether or not the particular guidance in the petition is adopted by the Commission,” Mr. Herdman cautioned, “public companies will do well to consider the objectives of the disclosure outlined in the petition and the materiality of the matters discussed in the draft guidance."