SEC Staff Report on SOX Section 401(c) Includes FASB Comments
“We provided input to and have discussed the content of the report with the SEC staff. I generally agree with the thrust of the SEC staff’s findings and principal recommendations, which are very consistent with FASB’s current activities, agenda plans, and overall commitment to improvement, simplification, and international convergence accounting standards and financial reporting. We look forward to continuing to work with the SEC and with all participants in the financial reporting system to achieve these important goals,” FASB Chairman Robert Herz.
The report, which looked at a broad range of topics with off-balance sheet implications, identifies several goals for the financial reporting community including efforts to:
- discourage transactions and transaction structures motivated primarily and largely by accounting and reporting considerations instead of economics
- expand the use of objectives-oriented standards
- improve the consistency and relevance of disclosures
- focus financial reporting on communication with investors, rather than just compliance with rules.
“The report identifies improvements that have occurred in financial reporting since passage of the Sarbanes-Oxley Act and, importantly, it offers recommendations for further improvements designed to increase both transparency and usefulness of the balance sheet,” said Donald T. Nicolaisen, SEC Chief Accountant.
The report also recommends certain changes in accounting and reporting requirements to complement the goals expressed including:
- Reconsidering the guidance for defined-benefit pension plans and other post-retirement benefit plans.
- Reconsidering the “all or nothing” accounting guidance for leases.
- Continuing the exploration of the feasibility of fair value reporting on all financial instruments.
- Improving the organization and integration of certain disclosures in filinfs.
- Encouraging the FASB to continue working on accounting guidance that determines whether an issuer would consolidate other entities in which the issuer has ownership or other interest.
“I expect that this comprehensive report will serve as an important building block in our continuing march toward greater transparency in financial reporting, which is a key ingredient to maintaining the efficiency of our financial markets as well as protecting investors,” said Chester Spatt, SEC Chief Economist.