[Congressional Record Volume 153, Number 41 (Friday, March 9, 2007)]
[Senate]
[Pages S2973-S2974]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 834. A bill to require annual testimony before Congress by the 
Securities and Exchange Commission, the Financial Accounting Standards 
Board, and the Public Company Accounting Oversight Board, relating to 
efforts to promote transparency in financial reporting; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. HATCH. Mr. President, I rise today to introduce a bill that would 
take a small but significant step toward identifying and repairing some 
of the regulatory problems currently found in our country's financial 
markets.
  In 2002, our financial markets were in serious trouble. In the wake 
of Enron and other prominent accounting scandals, the public's 
confidence in the markets was low. Investors expressed their lack of 
confidence by taking their money out of the stock market, and the 
market indices plummeted. In response to this crisis--and that is 
exactly what it was, a crisis--Congress passed the Sarbanes-Oxley Act 
of 2002.
  The law did what it was designed to do--re-establish faith in our 
financial markets--but it came at a cost. Complying with several of the 
bill's provisions has increased significantly the costs of doing 
business as a public corporation. Many large corporations continue to 
spend millions of dollars every year in order to comply with the 
Sarbanes-Oxley law. This, they can afford. However, many smaller firms 
have found the costs of compliance with the Act to be crushing, 
burdensome, and negatively affecting their ability to compete in a 
global marketplace.
  The result of this problem is twofold. First, a good number of 
smaller, publicly traded firms have been taken private by investors, 
with others expected to meet this same fate. Second, we have seen fewer 
companies going public, at least in the United States. During the year 
2000, 50 percent of all new Initial Public Offerings, IPOs, were done 
in the United States. By 2006 that number had fallen below 10 percent. 
In 2006, Hong Kong supplanted New York as the number one market for 
stock offerings world-wide.
  A number of my colleagues have pointed out that the dearth of IPOs 
threatens our standing as the premier financial market in the world. In 
the short term, we worry about this costing us prestige and jobs, but 
the real costs are much, much greater. Businesses that want to keep 
growing eventually need to become publicly-traded corporations in order 
to raise sufficient capital. With the costs of crossing that threshold 
greatly higher than they were a few years ago, many companies either 
delay or forego becoming a publicly traded corporation. Companies that 
become or remain privately-held firms eventually run into capital 
constraints of some sort that limit their growth.
  The resulting cost to our economy is a financial market where it is 
more difficult for corporations to raise sufficient capital to expand 
capacity or increase productivity, ultimately resulting in slower 
economic growth. Given the truly awesome problems we face in the 
upcoming years with regard to our unfunded entitlement obligations, we 
are going to need every bit of economic growth we can muster to satisfy 
them. Even those who are ambivalent about the benefits of economic 
growth on the standard of living of all Americans should appreciate its 
importance in meeting our future obligations.
  The bill I am introducing today would help us to identify and, I 
hope, ultimately address, many of the regulatory problems facing our 
financial markets. Specifically, it requires the Chairman of the 
Securities and Exchange Commission, the Chairman of the Financial 
Accounting Standards Board, and the Chairman of the Public Company 
Accounting Oversight Board to annually testify to the relevant Senate 
and House committees on their efforts to reduce complexity in financial 
reporting and to provide more accurate and clear financial information 
to investors. I expect that this requirement would result in more 
awareness of these problems by policymakers in the Legislative and 
Executive Branches, as well as in the private sector, along with 
suggested solutions to these challenges.
  While this bill would be a relatively small step, I believe it can 
help us understand exactly what must be done to address what ails our 
financial markets and help us achieve a consensus on how to fix these 
problems.
  Mr. President, a nearly identical bill was passed by the House of 
Representatives recently with no opposition. I urge the leadership of 
the Senate on both sides of the aisle, along with the members of the 
Committee on Banking, Housing, and Urban Affairs to support this bill, 
and join the House in making this important step toward increasing the 
efficiency of our financial markets.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 834

       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

[[Page S2974]]

     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 thereof, 
     beginning in 2007, and for 5 years thereafter, to the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate and the Committee on Financial Services of the House 
     of Representatives on their efforts to reduce the complexity 
     in financial reporting, so that investors are provided with 
     more accurate and clear financial information. That testimony 
     shall address--
       (1) 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''.
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