PROMOTING TRANSPARENCY IN FINANCIAL REPORTING ACT OF 2006; Congressional Record Vol. 152, No. 99
(House of Representatives - July 25, 2006)

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[Pages H5754-H5755]
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       PROMOTING TRANSPARENCY IN FINANCIAL REPORTING ACT OF 2006

  Mr. DAVIS of Kentucky. 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.
  The Clerk read as follows:

                               H.R. 5024

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Promoting Transparency in 
     Financial Reporting Act of 2006''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Transparent and clear financial reporting is integral 
     to the continued growth and strength of our capital markets 
     and the confidence of investors.
       (2) The increasing detail and volume of accounting, 
     auditing, and reporting guidance pose a major challenge [to 
     the quality and transparency of financial reporting].
       (3) The complexity of accounting and auditing standards in 
     the United States has added to the costs and effort involved 
     in financial reporting.

     SEC. 3. ANNUAL TESTIMONY ON REDUCING COMPLEXITY IN FINANCIAL 
                   REPORTING.

       The Securities and Exchange Commission, the Financial 
     Accounting Standards Board, and the Public Company Accounting 
     Oversight Board shall annually provide oral testimony by 
     their respective Chairpersons or a designee of the 
     Chairperson, beginning in 2007, and for 5 years thereafter, 
     to the Committee on Financial Services of the House of 
     Representatives on their efforts to reduce the complexity in 
     financial reporting to provide more accurate and clear 
     financial information to investors, including--
       (1) reassessing complex and outdated accounting standards;
       (2) improving the understandability, consistency, and 
     overall usability of the existing accounting and auditing 
     literature;
       (3) developing principles-based accounting standards;
       (4) encouraging the use and acceptance of interactive data; 
     and
       (5) promoting disclosures in ``plain English''.

  The SPEAKER pro tempore (Mr. Hayes). Pursuant to the rule, the 
gentleman from Kentucky (Mr. Davis) and the gentleman from New York 
(Mr. Israel) each will control 20 minutes.
  The Chair recognizes the gentleman from Kentucky.


                             General Leave

  Mr. DAVIS of Kentucky. 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.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Kentucky?
  There was no objection.
  Mr. DAVIS of Kentucky. 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

[[Page H5755]]

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.
  Mr. ISRAEL. 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.
  Mr. DAVIS of Kentucky. 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.
  Mr. ISRAEL. Madam Speaker, everything that can be said has been said. 
We have no speakers, and I yield back my time.
  The SPEAKER pro tempore (Mrs. Biggert). The question is on the motion 
offered by the gentleman from Kentucky (Mr. Davis) that the House 
suspend the rules and pass the bill, H.R. 5024, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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