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Sarbanes Oxley
Act |
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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
offbalance
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 rewards of the
special
purpose
entity; and
(E) any
recommendations of the Commission for
improving the
transparency and quality of reporting
offbalance
sheet
transactions in the financial statements and
disclosures
required to be filed by an issuer with the
Commission.
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