Financial Reporting

Education & Careers

Baruch College Basks in Golden Era of Accounting Reform

On May 2, 2002, Baruch College continued its long tradition of accounting reform advocacy by hosting a financial reporting conference that was packed with business executives, as well as students and teachers. The event ended with a standing-room-only question-and-answer session with Paul Volcker, chairman of Andersen's oversight board. Mr.

SEC Proposes New Rules On 'Critical' Accounting

In its first webcast meeting, the Securities & Exchange Commission (SEC) approved the issuance for comment of rule proposals on disclosures about "critical" accounting estimates.The SEC first suggested the "critical" accounting proposal in a release on cautionary advice issued in December 2001, but reviews of corporate disclosures indicate uneven compliance.
A&A

FASB Releases Flurry of Publications, Awaits Reform Bill

On May 1, 2002, as leaders of the House Energy Committee put the final touches on a radical reform bill to be titled the "Financial Accounting Standards Board Act," the standards board itself rushed to post a flurry of publications to its Web site. The Reform BillAlthough the reform bill is still subject to change, Reuters obtained a copy of the discussion draft of the proposed legislation.
A&A

FASB To Set 'Squeak-Through' Standards Over Protests

In a controversial move greeted with considerable skepticism by accounting firms and their clients, the Financial Accounting Standards Board (FASB) has changed the voting requirement for setting accounting standards. Standards may now be set by a simple majority vote of 4 out of 7 board members. Previously, the minimum requirement was a 5-2 supermajority vote.

House Passes Accounting Reform Bill After Lively Debate

On April 24, 2002, after several hours of lively debate, the House of Representatives passed H.R. 3763, the Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 (CARTA). The bill, which was sponsored by Rep. Michael G. Oxley and passed by a vote of 334 to 90, is the one most supported by the accounting profession. But many lawmakers feel more stringent measures are needed.

SEC Pioneers Analytical Software to Spot Future Enrons

Faced with a limited budget and committed to more frequent reviews of filings by large registrants, the Securities and Exchange Commission (SEC) is developing new analytical software to help identify the reports most likely to contain accounting irregularities or other potential problems.
A&A

FASB Changes Chairmen Amidst Turmoil and Criticism

The Financial Accounting Foundation (FAF), the organization that oversees the Financial Accounting Standards Board (FASB), announced a change in the head of the FASB. Chairman Ed Jenkins will retire on June 30, 2002, and PricewaterhouseCoopers Partner Robert H. Herz will become the fifth chairman in FASB's 29-year history. Mr. Herz's appointment puts an end to speculation that FAF might appoint a chairman from outside the Big Five.
A&A

Senate Bill of Rights To Address Audits, FASB, Options

On April 22, 2002, as the Financial Accounting Standards Board (FASB) prepared for a new chairman and the House of Representatives prepared for a vote on its leading accounting reform bill, Senator Carl Levin unveiled the Shareholders' Bill of Rights. Tougher and more comprehensive than the House bill, this new Senate bill will address audit reforms, accounting standard-setting, executive stock options, and more.Senator Levin is chairman of the Senate Permanent Subcommittee on Investigations.

Judge Rules 'Seriously Botched' Audit Is Not Fraud

Despite a public clamor for tighter regulation of auditors, a U.S. Court of Appeals ruled on April 19, 2002 that a "seriously botched" audit that led to a plunge in stock prices is not grounds for a securities fraud lawsuit. Violations of GAAPThe case sets important precedent as an interpretation of the Private Securities Litigation Reform Act (PSLRA), a law passed by Congress in 1995 over President Clinton's veto.

AIMR Wants Analysts to Report Risks with Ratings

The Association of Investment Management and Research (AIMR) is calling for a new uniform reporting system that will help analysts focus more attention on risk assessments and less on buy/sell ratings. Misdirected CriticismAnalysts have been criticized in recent months for perceived conflicts of interest and for failing to predict the demise of dot-com and telecommunications companies.

Educators Provide Free Software for Analyzing Footnotes

To help bewildered investors sort through the footnotes in a year when companies are disclosing more information than ever before, Hal Varian and Marti Hearst, two faculty members at the University of California at Berkeley, have introduced a free software program called "FootPrint." FootPrint allows investors to extract key information from the footnotes of an electronic SEC filing for use in a summary-level analysis on a separate document.
Tax

Congress Probes Taxes and Accounting for Stock Options

On April 18, 2002, the Senate Finance Committee heard testimony on the tax and accounting treatment of executive stock option compensation. Chairman Max Baucus said the objective of the hearing was to fully explore the issues that surfaced in the wake of Enron, even though some may fall under the jurisdiction of other committees.A key issue is whether the treatment of stock options is best handled as an accounting question or through the tax code. Senator Carl Levin argued that Congress has the responsibility for adopting a tax code.

SEC Called Into NY State Flap Over Analyst Reforms

According to the Wall Street Journal, officials from the Securities and Exchange Commission (SEC) joined in talks this week to discuss analyst reforms. The central issue regards alleged conflicts-of-interest that can affect the judgment of securities analysts employed by giant financial firms such as Merrill Lynch. If the SEC decides to take an active role in the resolution of this issue, it could lead to an industry-wide framework to reform how Wall Street research departments rate stock for investors.

GRI Issues Guidelines for Triple-Bottom-Line Reporting

While some in the profession may question the long-term viability of audit-only accounting firms, proposed guidelines issued recently by the Global Reporting Initiative (GRI) may help make the vision more feasible. The GRI's guidelines for "triple-bottom-line reporting" would broaden financial reporting into a three-dimensional model for economic, social and environmental reporting.

SEC Releases Proposal to Modernize Reporting Rules

On April 11, 2002, the Securities and Exchange Commission (SEC) approved the release for public comment of proposed rules that would modernize and improve the timeliness of its system of corporate disclosures. The proposed changes recognize the importance of the Internet and move companies closer to real-time reporting. Some see these changes as long overdue.
Community News

Xerox to Pay Record Financial Fraud Penalty, Investigation Turns to KPMG

The SEC has informed representatives of KPMG, and executives of Xerox, about the possibility of leveling charges against them as part of an ongoing investigation into accounting irregularities at Xerox.In a civil complaint filed against Xerox today, the SEC meticulously outlines details of an alleged fraud, accusing Xerox of "relying on what it called 'one-time actions,' 'one-offs,' 'accounting opportunities' and 'accounting tricks'" resulting in an acceleration of the recognition of copier-equipment r

IIA Urges More Progress in Internal Control Reporting

In preparation for a meeting on April 4, 2002 with the board of directors of the New York Stock Exchange, the Institute of Internal Auditors (IIA) conducted a lightning-fast Internet survey of its members to determine the norms for public reporting on internal controls. The survey was rolled out, completed and compiled in just two days thanks to Internet technology. The results showed progress in internal control reporting, but the IIA thinks more progress is needed to strengthen corporate accountability and enhance corporate governance.

Wall Street Journal Gets a New Look

On April 9, 2002, readers of the print editions of the U.S. Wall Street Journal were treated to a new look for the first time since 1942.

Forbes 500 Introduces Report on Pro Forma Earnings

Noting that aggregate corporate earnings for 2001 were "pretty awful," Forbes Magazine added a new table to its annual report on the 500 largest American companies. For the first time in 34 years of ranking companies, this year's report features companies that use "pro forma accounting."Although it admits pro forma earnings can present useful information for investors at times, (e.g.
A&A

Panel Wants SEC to Lead Accounting into Internet Age

On April 4, 2002, the Securities and Exchange Commission (SEC) hosted a roundtable in Chicago to find out how best to improve financial disclosures. The participants represented key occupations and associations that typically take a back seat in the setting of accounting standards. Their nearly unanimous conclusion: the SEC should take the lead in bringing accounting and financial disclosures into the Internet Age. How to Overcome ObstaclesThe panelists also gave the SEC some advice about how to overcome obstacles to needed reforms:Priority no.

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