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

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

Further reading:

Off balance sheet structures too risky

Standard setters outline response to credit crunch

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Fiona Westwood of Smith and Williamson.