Wednesday, June 27, 2007
Chairman Christopher Cox today announced the establishment of an advisory committee that will examine the U.S. financial reporting system with the goals of reducing unnecessary complexity and making information more useful and understandable for investors. The SEC Advisory Committee on Improvements to Financial Reporting will study the causes of complexity and recommend to the Commission how to make financial reports clearer and more beneficial to investors, reduce costs and unnecessary burdens for preparers, and better utilize advances in technology to enhance all aspects of financial reporting.
Chairman Cox said that the Commission will direct the advisory committee to conduct its work with a view toward removing practical and structural impediments that reduce transparency or unnecessarily increase the cost of preparing and analyzing financial reports to the detriment of the investor. The advisory committee will focus on the following areas before making recommendations to the Commission:
the current approach to setting financial accounting and reporting standards;
the current process of regulating compliance by registrants and financial professionals with accounting and reporting standards;
the current systems for delivering financial information to investors and accessing that information;
other environmental factors that drive unnecessary complexity and reduce transparency to investors;
whether there are current accounting and reporting standards that impose costs that outweigh the resulting benefits, and
whether this cost-benefit analysis is likely to be impacted by the growing use of international accounting standards.
As part of its consideration of these areas, the advisory committee will focus on how technology can help address accounting complexity by making financial information more useful to a greater number of investors. Through the power of XBRL, hyperlinks, and other technological advances, the opportunity exists to redesign the financial reporting system to deliver the type and level of information that investors need to access their preferred indicators of company performance.