[Congressional Record Volume 152, Number 99 (Tuesday, July 25, 2006)]
[House]
[Pages H5754-H5755]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1430
PROMOTING TRANSPARENCY IN FINANCIAL REPORTING ACT OF 2006
Mr. DAVIS of Kentucky. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 5024) to require annual oral testimony before the
Financial Services Committee of the Chairperson or a designee of the
Chairperson of the Securities and Exchange Commission, the Financial
Accounting Standards Board, and the Public Company Accounting Oversight
Board, relating to their efforts to promote transparency in financial
reporting, as amended.
The Clerk read as follows:
H.R. 5024
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Promoting Transparency in
Financial Reporting Act of 2006''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Transparent and clear financial reporting is integral
to the continued growth and strength of our capital markets
and the confidence of investors.
(2) The increasing detail and volume of accounting,
auditing, and reporting guidance pose a major challenge [to
the quality and transparency of financial reporting].
(3) The complexity of accounting and auditing standards in
the United States has added to the costs and effort involved
in financial reporting.
SEC. 3. ANNUAL TESTIMONY ON REDUCING COMPLEXITY IN FINANCIAL
REPORTING.
The Securities and Exchange Commission, the Financial
Accounting Standards Board, and the Public Company Accounting
Oversight Board shall annually provide oral testimony by
their respective Chairpersons or a designee of the
Chairperson, beginning in 2007, and for 5 years thereafter,
to the Committee on Financial Services of the House of
Representatives on their efforts to reduce the complexity in
financial reporting to provide more accurate and clear
financial information to investors, including--
(1) reassessing complex and outdated accounting standards;
(2) improving the understandability, consistency, and
overall usability of the existing accounting and auditing
literature;
(3) developing principles-based accounting standards;
(4) encouraging the use and acceptance of interactive data;
and
(5) promoting disclosures in ``plain English''.
The SPEAKER pro tempore (Mr. Hayes). Pursuant to the rule, the
gentleman from Kentucky (Mr. Davis) and the gentleman from New York
(Mr. Israel) each will control 20 minutes.
The Chair recognizes the gentleman from Kentucky.
General Leave
Mr. DAVIS of Kentucky. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days to revise and extend their remarks
and include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Kentucky?
There was no objection.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
I want to recognize this bill as a result of a true bipartisan
effort. I want to thank Chairman Oxley and Ranking Member Frank for
their support, and particularly our original cosponsors Congressman
Israel from New York and Congressman Scott from Georgia. This has been
an effort that has come together across the aisle to provide a bill
which would improve financial reporting, simplify our regulatory system
over time to ultimately help our country compete in a global economy.
In the post-Enron financial era, transparent reporting has become an
increasingly important component promoting a healthy corporate
environment. Financially stable, accountable corporations are essential
for expanding the U.S. business sector, promoting investor confidence,
and for strengthening the economy. However, it is important to examine
ways in which such accountability and reporting standards can become
more efficient and more transparent. A cumbersome, costly system will
only reduce our competitiveness in a connected world economy and
ultimately will cost us jobs.
I regularly hear complaints from business owners and executives in
Kentucky about the cost and the complexity of financial reporting
requirements mandated by the Federal Government. As a former business
consultant, I know firsthand the difficulties faced during the time-
consuming and costly process of accounting and financial disclosure. We
must update our methods of accountability to reflect 21st century
technology in a global marketplace.
Unfortunately, financial reporting remains an arduous task with too
many opportunities for error and for manipulation. Reassessing outdated
accounting standards and improving the ability of the average investor
to understand and utilize financial literature is essential to the
livelihood of American business and the protection of American
investors.
Requiring annual congressional testimony by the Securities and
Exchange Commission, the Financial Accounting Standards Board, and the
Public Company Accounting Oversight Board stresses that simplification,
cost reduction, and transparency in accounting standards and financial
reporting are public priorities. We must assure continuity in our
markets and continuity in the process.
This bill will provide the Federal Government the opportunity to
apply a philosophy of continuous improvement, looking for ways to
improve the regulatory structure and to reduce costs.
As stated in the bill, we would like to direct attention to several
areas of particular concern. First, I would like to point out that H.R.
5024 will give Congress a way to measure progress on the efforts of
these organizations over the next 5 years, and ensure that they are
working to streamline and modernize the process of financial reporting.
First, we need to reassess complex and outdated accounting standards.
We need to improve understandability, consistency, and the overall
usability
[[Page H5755]]
of the existing accounting and auditing literature. We need to develop
principle-based accounting standards. We need to encourage the use and
acceptance of interactive data, or extensible business reporting
language, XBRL, and, finally, in the end to promote disclosure in plain
English.
Simplifying the process of accountability will do two things: First,
it reduces the risk of error and misuse by making the process simpler
and more transparent. And, second, it will help working families have
visibility to information they can understand without needing to ask a
CPA or a tax attorney.
I appreciate the efforts of these organizations thus far to reduce
complexity, and I recognize the public statements of support for such
efforts by SEC Chairman Chris Cox and FASB Chairman Robert Herz. As SEC
Chairman Cox said at the SEC Historical Society meeting in June, this
process is going to be a long one, but it is worth it to make sure that
the capital markets remain strong and remain vibrant. I urge my
colleagues to support this important legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. ISRAEL. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise today in support of the Promoting Transparency
in Financial Reporting Act, and I want to thank my very good friend
from Kentucky (Mr. Davis) for introducing this important measure. I was
pleased to cosponsor it and I am very pleased to work with him on the
bill.
I also want to thank the chairman and ranking member of the Financial
Services Committee, Mr. Oxley and Mr. Frank, for bringing this
bipartisan legislation to the floor today.
H.R. 5024 requires that the chairpersons of the Securities and
Exchange Commission, the Financial Accounting Standards Board, and the
Public Company Accounting Oversight Board provide oral testimony to the
Committee on Financial Services on their efforts to reduce the
complexity in financial reporting to provide more accurate and clear
financial information to investors. These appearances before the
committee would begin in 2007 and continue annually for 5 years.
Madam Speaker, the ability of America's investors to make informed
decisions is severely compromised when financial reporting is
inaccurate, when it is incomplete, when it is unclear. We saw the
consequences of bad financial reporting years ago during the corporate
accountability scandals at Enron and WorldCom, among others. Those
bankruptcies not only revealed weaknesses in many aspects of our
financial reporting system, but showed the devastating financial impact
when their financial statements are not held to the highest standards.
In many cases, the complexity of financial reporting requirements has
made it very difficult to detect purposeful violations of those
standards. Congress, regulators, and the industry assessed these
financial reporting failures and reacted with efforts aimed at
strengthening the financial reporting system. Sarbanes-Oxley made very
important initial strides to this end; however, more needs to be done.
This measure is an important next step. By calling on the SEC, PCAOB,
and FASB to testify each year on the steps they are taking to improve
financial disclosures, Congress is ensuring that it can and will
effectively carry out its oversight function. We can gather the
necessary information to ensure that, should we need to act
legislatively, we are doing it in a sober, thoughtful manner based on
data rather than in haste as we respond to the latest news cycle.
Madam Speaker, this legislation will help us as we work with the FEC,
FASB and the PCAOB to improve our financial reporting system. It is
important that we maintain a consistent focus on this issue. And, to
that end, I urge all of my colleagues to support the measure. Again, I
was pleased to work closely with the gentleman from Kentucky.
Madam Speaker, I reserve the balance of my time.
Mr. DAVIS of Kentucky. Madam Speaker, again, I want to reiterate my
thanks to the gentleman from New York. It has been a great process to
see this come to pass. Let's pass this bill as a first step toward
creating a process for continuous improvement that will simplify and
improve our financial reporting regulatory framework.
Madam Speaker, I have no other requests for time, and I yield back
the balance of my time.
Mr. ISRAEL. Madam Speaker, everything that can be said has been said.
We have no speakers, and I yield back my time.
The SPEAKER pro tempore (Mrs. Biggert). The question is on the motion
offered by the gentleman from Kentucky (Mr. Davis) that the House
suspend the rules and pass the bill, H.R. 5024, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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