[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       (1) reassessing complex and outdated accounting standards;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.

                          ____________________