[Congressional Record Volume 153, Number 33 (Tuesday, February 27, 2007)]
[House]
[Pages H1903-H1905]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROMOTING TRANSPARENCY IN FINANCIAL REPORTING ACT OF 2007
Mr. SCOTT of Georgia. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 755) 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.
The Clerk read as follows:
H.R. 755
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 2007''.
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.
(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(1) reassessing complex and outdated accounting standards;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. Pursuant to the rule, the gentleman from
Georgia (Mr. Scott) and the gentleman from Kentucky (Mr. Davis) each
will control 20 minutes.
The Chair recognizes the gentleman from Georgia.
General Leave
Mr. SCOTT of Georgia. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks on this legislation and to insert extraneous material
therein.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Georgia?
There was no objection.
Mr. SCOTT of Georgia. Mr. Speaker, I rise in support of H.R. 755, and
I yield myself such time as I may consume.
(Mr. SCOTT of Georgia asked and was given permission to revise and
extend his remarks.)
{time} 1430
Mr. SCOTT of Georgia. Mr. Speaker, this Promoting Transparency in
Financial Reporting Act is a bipartisan bill that the House considered
last year and passed on a voice vote. The legislation, however, failed
to become law during the 109th Congress; and as a result, we now must
consider these matters anew in the 110th Congress.
H.R. 755 has a simple premise, Mr. Speaker. For the next 5 years, it
would require annual testimony before the House Financial Services
Committee by those entities most involved in establishing and
implementing our Nation's financial reporting system. These parties
include the Securities and Exchange Commission, the Financial
Accounting Standards Board, and the Public Company Accounting Oversight
Board.
Since the 1930s, the Securities and Exchange Commission has required
public companies to file financial reports like income statements and
balance sheets. Today, companies also rely on the generally accepted
accounting principles developed by the Financial Accounting Standards
Board to prepare these reporting documents. This independent accounting
standard-setter came into existence in the 1970s. The tidal wave of
accounting scandals at the start of this decade led Congress to
reassess our Nation's financial reporting system and adopt further
reforms in the Sarbanes-Oxley Act. Among other things, this landmark
law created the Public Company Accounting Oversight Board. This body
establishes the auditing standards used to examine public company
accounting statements. It also registers and inspects the auditors of
public companies.
Even without this legislation, the Financial Services Committee is
already working to examine accounting and auditing issues and the work
of each of these parties. Earlier this month we approved an oversight
plan for the 110th Congress. Several of the action items in that plan
address accounting issues. For example, the oversight plan calls for
the committee to review the efforts of the Financial Accounting
Standards Board to improve financial accounting standards. It also
calls for us to study the progress being made on establishing
international accounting standards. The plan further calls for the
committee to examine the work of the Public Company Accounting
Oversight Board as it implements the auditing improvements made by the
Sarbanes-Oxley Act. This legislation, therefore, builds on what we had
already planned to do in the 110th Congress and what other sessions of
Congress should plan to do.
These proposed annual hearings over the next 5 years will help us to
reassess complex accounting standards. It will help us improve the
understandability of financial statements, and it will encourage the
acceptance of interactive data. Even though it seems highly likely that
the parties subject to this legislation would testify before the
Financial Services Committee on these matters if asked, this bill will
make certain that the committee remains focused on these important
issues in the immediate future.
In addition, the adoption of H.R. 755 will help to encourage our
regulators and standard-setters to fulfill their own roles and
initiatives to achieve greater transparency, promote greater
uniformity, and reduce complexity in financial reporting not only at
home but also around the world.
In recent years, our financial reporting standards have become more
and more complex and complicated, especially as we have sought to
address more difficult issues like the accounting treatment of
derivatives and hedging instruments. This complexity has created
difficulties not only for the companies that operate in the United
States or that access our capital markets but also the investors and
advisers who read and use financial statements.
For our Nation to remain competitive, we need to have robust capital
markets. For our capital markets to be strong, we need to have
transparent, clear, and understandable financial reporting. We also
need to ensure that the entities responsible for accounting and
auditing issues continue to work smoothly together. H.R. 755 will help
us to stay focused on achieving these important and desirable goals.
In conclusion, Mr. Speaker, I want to commend the hard work of the
gentleman from Kentucky (Mr. Davis), who is the primary sponsor on this
bill. And I want to commend Mr. Davis for introducing this measure, and
I am proud to work with him as the lead cosponsor over these last
years. And, hopefully, this time will be the charm.
This bill is aimed at ensuring that individuals have access to the
information that they truly need to make better investment decisions.
And I urge support for H.R. 755.
Mr. Speaker, I reserve the balance of my time.
[[Page H1904]]
Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise today in support of H.R. 755, the Promoting
Transparency in Financial Reporting Act. And I also would like to thank
the gentleman from Georgia for his hard work on this bill. We started
nearly 18 months ago, and it is, I think, a true credit to
bipartisanship in a way that it is going to help the American people,
help small business, and ultimately help to create jobs and give people
the opportunity to see clearly into the operation of the financial
markets.
In the post-Enron financial era, transparent reporting has become an
increasingly important component of promoting a healthy corporate
environment. Financially stable and accountable corporations are
essential for expanding the U.S. business sector, promoting investor
confidence, and strengthening the economy.
However, it is important to examine ways in which such accountability
and reporting standards can become both more efficient and more
transparent. A cumbersome, costly system will only reduce our
competitiveness in a connected world economy and ultimately cost us
jobs.
I regularly hear complaints from business owners and executives in
Kentucky about the costs and complexities of financial reporting
requirements mandated by the Federal Government. As a former small
business consultant, I know firsthand the difficulties faced during the
time-consuming and costly processes of accounting and financial
disclosure. 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 documents are essential to
the livelihood of American business and the protection of America's
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. H.R. 755 will help hold the SEC, FASB,
and PCAOB, as well as Congress, accountable for making progress on
these important issues. H.R. 755 will give Congress a way to measure
progress on the efforts of these organizations over the next 5 years
and ensure they are working to streamline and to modernize the process
of financial reporting.
As stated in the bill, we would like to direct attention to several
areas of interest: first, we would like to reassess outdated and
complex accounting standards; improve the understandability,
consistency, and overall usability of the existing accounting and
auditing literature; develop principles-based accounting standards; and
encourage the use and acceptance of interactive data or extensible
business reporting language, also known as XBRL; and, finally, to
promote disclosures in plain English. I think it would be great
ultimately for investors not to need a CPA and a lawyer to understand
their own financial statements or the reports that they receive from
companies they invest in.
H.R. 755 isn't intended to imply that these organizations have yet to
move towards these goals. In fact, there are many examples of progress
already. Each organization has already taken strides to improve
financial reporting and the implementation of the Sarbanes-Oxley Act,
and I applaud these efforts.
For example, in December, 2006, PCAOB proposed new standards for
auditing of internal controls designed to focus auditors on the most
important issues. The proposed standards eliminate unnecessary audit
requirements and, most importantly, provide guidance on how to adjust
the audit for a smaller, less complex company. I appreciate the
willingness of the PCAOB to respond to feedback from Congress and the
investment community.
Another example is the SEC's encouragement of the use of interactive
data. Interactive data uses ``tags'' for key facts in financial
statements so investors can quickly extract and analyze information in
an easily understandable format. The SEC recently announced the
expansion of the voluntary test program, which already includes two
dozen companies representing more than $1 trillion of market value.
Participating companies are rewarded with expedited reviews of SEC
filings. In turn, the test group will help the SEC to decide how
interactive data can be of most use to investors. These kinds of public
and private partnerships will ultimately serve the American people best
and keep our markets robust and strong.
Many have criticized the burden and cost of Sarbanes-Oxley, and
particularly section 404, on small public companies. It is critical
that we strike the right balance between requiring financial reporting
to bolster investor confidence and keeping our markets open to both
domestic and foreign investment. H.R. 755 will help Congress maintain
an active and essential role in this balancing act.
Modernizing reporting processes, increasing transparency, and
reducing the costs of financial reporting will help ease the regulatory
burden on businesses and strengthen the ability of individual investors
to make educated financial decisions. To quote SEC Chairman Chris Cox,
this process is going to be ``a long one, but it is worth it to make
sure that the capital markets remain strong and vibrant.''
The Promoting Transparency in Financial Reporting Act will hold the
SEC, FASB, and PCAOB, as well as Congress, accountable for making
progress on these important issues.
Let's pass this bill as a first step towards creating a process for
continuous improvement that will simplify our financial reporting
regulatory framework.
I would like to thank in particular Ranking Member Bachus, Chairman
Frank, and Chairman Kanjorski for their support and my friend from
Georgia for his hard work on this to bring this to the floor now.
Mr. Speaker, I reserve the balance of my time.
Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may
consume.
This is, as we mentioned, a very important bill that will certainly
increase the confidence of the American people in our financial systems
and make it smoother and with less complexity.
And I want to also thank the leadership of the Financial Services
Committee, Chairmen Barney Frank and Kanjorski, for their excellent
leadership on this very, very important and timely issue. And, again, I
want to commend the hard work of my colleague Mr. Davis in providing
leadership on this.
Ms. WATERS. Mr. Speaker, I rise in support of H.R. 755, Promoting
Transparency in Financial Reporting Act of 2007.
H.R. 755 is a simple, but important measure. It requires the
Securities and Exchange Commission, the Financial Accounting Standards
Board, and the Public Company Accounting Board to provide annual
testimony by their respective chairpersons or designees of the
chairperson starting next year and for five subsequent years to the
Committee on Financial Services on their efforts to reduce the
complexity of financial reporting to provide a more accurate and clear
financial information to investors, including:
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; and promoting disclosures in plain English.
In view of the different accounting standards being used in the
private sector and government, it is clear that we need to have
information that is reliable and credible. Financial information that
does not meet rigorous and acceptable standards sends the wrong signals
to investors as well as to the public about the real the financial
condition of a business.
As we have witnessed over the past several years, the quality of
financial information can make the difference between the true value of
a company and what the public perceives to be its condition. H.R. 755
is an important first step towards making sure that the information
being reported to investors and to the public is believable. As such, I
ask my colleagues to join me in supporting this bill.
Mr. SCOTT of Georgia. Mr. Speaker, I have no further requests for
time, and I yield back the balance of my time.
Mr. DAVIS of Kentucky. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Georgia (Mr.
[[Page H1905]]
Scott) that the House suspend the rules and pass the bill, H.R. 755.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. DAVIS of Kentucky. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.
____________________