SEC will go after companies with opaque reports

The US regulator has warned that it will pursue companies who do not provide adequate disclosure and transparency in their financial reports, the office of the chief accountant of the Securities and Exchange Commission said yesterday.

In testifying about the Financial Accounting Standards Board's proposals on off-balance sheet accounting, senior SEC officials said the regulator will ask companies, where necessary, to improve disclosure through the review and comment process.

The rule could force companies to book billions in troubled assets and raise more capital to offset their risks.

FASB said in its proposal that qualifying special purpose entities, or QSPEs - an accounting concept banks have used to keep those assets off their balance sheets - are 'no longer relevant for accounting purposes.'

'Where we are unable to achieve improved disclosure through the review and comment process, we stand ready to take any necessary action, including referring companies with material disclosure deficiencies to the Division of Enforcement,' the SEC said.

'Investors, analysts, auditors, and preparers of financial disclosure play a fundamental role in improving the transparency of financial reporting,' the SEC added.

Further reading:

Off balance sheet structures too risky

Standard setters outline response to credit crunch