Promoting Transparency in Financial Reporting Act of 2006

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 5024) to require annual oral testimony before the Financial Services Committee of the Chairperson or a designee of the Chairperson of the Securities and Exchange Commission, the Financial Accounting Standards Board, and the Public Company Accounting Oversight Board, relating to their efforts to promote transparency in financial reporting, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days to revise and extend their remarks and include extraneous material on the bill under consideration.

Mr. Speaker, I yield myself such time as I may consume.

I want to recognize this bill as a result of a true bipartisan effort. I want to thank Chairman Oxley and Ranking Member Frank for their support, and particularly our original cosponsors Congressman Israel from New York and Congressman Scott from Georgia. This has been an effort that has come together across the aisle to provide a bill which would improve financial reporting, simplify our regulatory system over time to ultimately help our country compete in a global economy.

In the post-Enron financial era, transparent reporting has become an increasingly important component promoting a healthy corporate environment. Financially stable, accountable corporations are essential for expanding the U.S. business sector, promoting investor confidence, and for strengthening the economy. However, it is important to examine ways in which such accountability and reporting standards can become more efficient and more transparent. A cumbersome, costly system will only reduce our competitiveness in a connected world economy and ultimately will cost us jobs.

I regularly hear complaints from business owners and executives in Kentucky about the cost and the complexity of financial reporting requirements mandated by the Federal Government. As a former business consultant, I know firsthand the difficulties faced during the time- consuming and costly process of accounting and financial disclosure. We must update our methods of accountability to reflect 21st century technology in a global marketplace.

Unfortunately, financial reporting remains an arduous task with too many opportunities for error and for manipulation. Reassessing outdated accounting standards and improving the ability of the average investor to understand and utilize financial literature is essential to the livelihood of American business and the protection of American investors.

Requiring annual congressional testimony by the Securities and Exchange Commission, the Financial Accounting Standards Board, and the Public Company Accounting Oversight Board stresses that simplification, cost reduction, and transparency in accounting standards and financial reporting are public priorities. We must assure continuity in our markets and continuity in the process.

This bill will provide the Federal Government the opportunity to apply a philosophy of continuous improvement, looking for ways to improve the regulatory structure and to reduce costs.

As stated in the bill, we would like to direct attention to several areas of particular concern. First, I would like to point out that H.R. 5024 will give Congress a way to measure progress on the efforts of these organizations over the next 5 years, and ensure that they are working to streamline and modernize the process of financial reporting.

First, we need to reassess complex and outdated accounting standards. We need to improve understandability, consistency, and the overall usability

of the existing accounting and auditing literature. We need to develop principle-based accounting standards. We need to encourage the use and acceptance of interactive data, or extensible business reporting language, XBRL, and, finally, in the end to promote disclosure in plain English.

Simplifying the process of accountability will do two things: First, it reduces the risk of error and misuse by making the process simpler and more transparent. And, second, it will help working families have visibility to information they can understand without needing to ask a CPA or a tax attorney.

I appreciate the efforts of these organizations thus far to reduce complexity, and I recognize the public statements of support for such efforts by SEC Chairman Chris Cox and FASB Chairman Robert Herz. As SEC Chairman Cox said at the SEC Historical Society meeting in June, this process is going to be a long one, but it is worth it to make sure that the capital markets remain strong and remain vibrant. I urge my colleagues to support this important legislation.

Mr. Speaker, I reserve the balance of my time.

Madam Speaker, again, I want to reiterate my thanks to the gentleman from New York. It has been a great process to see this come to pass. Let's pass this bill as a first step toward creating a process for continuous improvement that will simplify and improve our financial reporting regulatory framework.

Madam Speaker, I have no other requests for time, and I yield back the balance of my time.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I rise today in support of the Promoting Transparency in Financial Reporting Act, and I want to thank my very good friend from Kentucky (Mr. Davis) for introducing this important measure. I was pleased to cosponsor it and I am very pleased to work with him on the bill.

I also want to thank the chairman and ranking member of the Financial Services Committee, Mr. Oxley and Mr. Frank, for bringing this bipartisan legislation to the floor today.

H.R. 5024 requires that the chairpersons of the Securities and Exchange Commission, the Financial Accounting Standards Board, and the Public Company Accounting Oversight Board provide oral testimony to the Committee on Financial Services on their efforts to reduce the complexity in financial reporting to provide more accurate and clear financial information to investors. These appearances before the committee would begin in 2007 and continue annually for 5 years.

Madam Speaker, the ability of America's investors to make informed decisions is severely compromised when financial reporting is inaccurate, when it is incomplete, when it is unclear. We saw the consequences of bad financial reporting years ago during the corporate accountability scandals at Enron and WorldCom, among others. Those bankruptcies not only revealed weaknesses in many aspects of our financial reporting system, but showed the devastating financial impact when their financial statements are not held to the highest standards.

In many cases, the complexity of financial reporting requirements has made it very difficult to detect purposeful violations of those standards. Congress, regulators, and the industry assessed these financial reporting failures and reacted with efforts aimed at strengthening the financial reporting system. Sarbanes-Oxley made very important initial strides to this end; however, more needs to be done.

This measure is an important next step. By calling on the SEC, PCAOB, and FASB to testify each year on the steps they are taking to improve financial disclosures, Congress is ensuring that it can and will effectively carry out its oversight function. We can gather the necessary information to ensure that, should we need to act legislatively, we are doing it in a sober, thoughtful manner based on data rather than in haste as we respond to the latest news cycle.

Madam Speaker, this legislation will help us as we work with the FEC, FASB and the PCAOB to improve our financial reporting system. It is important that we maintain a consistent focus on this issue. And, to that end, I urge all of my colleagues to support the measure. Again, I was pleased to work closely with the gentleman from Kentucky.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, everything that can be said has been said. We have no speakers, and I yield back my time.