The bill, entitled "Promoting Transparency in Financial Reporting Act of 2007," requires that a representative from each of the above-noted standard-setters annually appear before the Financial Services Committee and submit testimony on their efforts to reduce the complexity of financial reporting. This is to go on for the next five years, after which, I am certain, the whole problem will be solved. The bill also requires the testimony to include information pertaining to:
- Reassessing complex and outdated accounting standards.
- Improving the understandability, consistency, and overall usability of the existing accounting and auditing literature.
- Developing principles-based accounting standards.
- Encouraging the use and acceptance of interactive data.
- Promoting disclosures in "plain English."
"I hear complaints all the time from business owners and executives in Kentucky about the costs and complexity of financial reporting requirements mandated by the federal government," he said. (You think? – my comment, for those of you who were wondering) "By requiring annual congressional testimony by the SEC, FASB, and PCAOB, we are making simplification and cost reduction a public priority and giving Congress a way to measure progress on reducing complexity, modernizing processes, increasing transparency, and reducing costs of financial reporting."
As the vote tally indicates, everyone is certainly willing to jump on the bandwagon and throw in their support, but does anyone plan on doing something meaningful? Surprisingly, enough, the answer is yes. Just last week, Senators John Kerry and Olympia Snowe called for a delayed implementation of the SOX Section 404 requirements for small public firms. Other business leaders and public interest groups have asked for a small business exemption from Section 404, which the SEC is considering. Senator Kerry also is planning to reintroduce legislation that would allow the SBA to subsidize Section 404 compliance costs of smaller public companies. While these efforts will certainly help smaller companies, I have to wonder if the cost of SOX is worth the result, or, costs aside, is it even accomplishing what was intended?
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