Chair's corner.

• Author: Fletchall, Randy

I expect some important developments currently under way in financial reporting to change public company reporting significantly and for the better. Last summer the Securities and Exchange Commission established the SEC Advisory Committee on improvements to Financial Reporting (CIFiR) to examine the U.S. financial reporting system. CIFiR's two goals, quite simply, were to reduce unnecessary complexity and make information more useful and understandable for investors. Under the direction of Robert Pozen, who was interviewed by the Journal of Accountancy, in Oct. 2007, this 17-member advisory committee has developed several substantive proposals based on its work over the past year. After considering public comments on its preliminary proposals in June, CIFiR now is working on completing its final report for issuance later this month.

CIFiR has made several preliminary recommendations that cover a wide range of improvements in financial reporting, including opportunities to eliminate unnecessary complexity. As CPAs, we work with complicated transactions and structures, and often it seems difficult to achieve transparency without going into great detail. However, in some cases, the voluminous and detailed financial accounting rules, and the exceptions and bright lines in the standards, may not necessarily provide greater insight into, but instead may make it more difficult to understand, financial statements and disclosures. CIFiR searched for the reasons behind the complexity and then determined what improvements could be made.

The profession has actively participated in the work of CIFiR. Some CPAs are members of CIFiR. The Center for Audit Quality, which is affiliated with the AICPA (www.thecaq.org), has been very involved throughout the process, serving as a key resource to CIFiR and submitting a detailed comment letter on its draft report. Many CPAs have met with CIFiR or its subcommittees to provide input on specific issues. As just one example, in Mar. I testified before CIFiR on its preliminary recommendations about the use of judgment by both preparers of financial statements and auditors and the need for well-reasoned, good-faith judgments to be respected, and also on the use of eXtensible Business Reporting Language, or XBRL, for tagging data in financial reports submitted to the SEC.

From the start, CIFiR was clear in its intent to develop proposals that...