TITLE IV - ENHANCED FINANCIAL DISCLOSURES
SEC. 401. DISCLOSURES IN PERIODIC REPORTS.
(a) DISCLOSURES REQUIRED. - Section 13 of the Securities Exchange Act of 1934
(15 U.S.C. 78m) is amended by adding at the end the following:
"(i) ACCURACY OF FINANCIAL REPORTS. - Each financial report that contains
financial statements, and that is required to be prepared in accordance with
(or reconciled to) generally accepted accounting principles under this title
and filed with the Commission shall reflect all material correcting adjustments
that have been identified by a registered public accounting firm in accordance
with generally accepted accounting principles and the rules and regulations
of the Commission.
"(j) OFF-BALANCE SHEET TRANSACTIONS. - Not later than 180 days after the
date of enactment of the Sarbanes-Oxley Act of 2002, the Commission shall issue
final rules providing that each annual and quarterly financial report required
to be filed with the Commission shall disclose all material off-balance sheet
transactions, arrangements, obligations (including contingent obligations),
and other relationships of the issuer with unconsolidated entities or other
persons, that may have a material current or future effect on financial condition,
changes in financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses.".
(b) COMMISSION RULES ON PRO FORMA FIGURES. - Not later than 180 days after
the date of enactment of the Sarbanes-Oxley Act fo 2002, the Commission shall
issue final rules providing that pro forma financial information included in
any periodic or other report filed with the Commission pursuant to the securities
laws, or in any public disclosure or press or other release, shall be presented
in a manner that -
(1) does not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the pro forma financial
information, in light of the circumstances under which it is presented, not
misleading; and
(2) reconciles it with the financial condition and results
of operations of the issuer under generally accepted accounting principles.
(c) STUDY AND REPORT ON SPECIAL PURPOSE ENTITIES. -
(1) STUDY REQUIRED. - The Commission shall, not later than
1 year after the effective date of adoption of off-balance sheet disclosure
rules required by section 13(j) of the Securities Exchange Act of 1934, as added
by this section, complete a study of filings by issuers and their disclosures
to determine -
(A) the extent of off-balance sheet transactions, including
assets, liabilities, leases, losses, and the use of special purpose entities;
and
(B) whether generally accepted accounting rules result in
financial statements of issuers reflecting the economics of such off-balance
sheet transactions to investors in a transparent fashion.
(2) REPORT AND RECOMMENDATIONS. - Not later than 6 months
after the date of completion of the study required by paragraph (1), the Commission
shall submit a report to the President, the Committee on Banking, Housing, and
Urban Affairs of the Senate, and the Committee on Financial Services of the
House of Representatives, setting forth -
(A) the amount or an estimate of the amount of off-balance
sheet transactions, including assets, liabilities, leases, and losses of, and
the use of special purpose entities by, issuers filing periodic reports pursuant
to section 13 or 15 of the Securities Exchange Act of 1934;
(B) the extent to which special purpose entities are used
to facilitate off-balance sheet transactions;
(C) whether generally accepted accounting principles or the
rules of the Commission result in financial statements of issuers reflecting
the economics of such transactions to investors in a transparent fashion;
(D) whether generally accepted accounting principles specifically
result in the consolidation of special purpose entities sponsored by an issuer
in cases in which the issuer has the majority of the risks and re- wards of
the special purpose entity; and
(E) any recommendations of the Commission for improving the
transparency and quality of reporting off-balance sheet transactions in the
financial statements and disclosures required to be filed by an issuer with
the Commission.
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