VideoThe Enron effect continues.
Yesterday, officials at the Securities and Exchange Commission (SEC) advised companies to remember current disclosure requirements when putting together annual reports. This comes as most companies prepare for the 2001 annual report season.
Clearly alluding to the recent collapse of energy trader Enron, the regulatory agency singled out three areas that managers should be mindful of when preparing their corporate yearbooks:
- Liquidity and capital resources, including off-balance sheet arrangements.
- Certain trading activities that include non-exchange traded contracts accounted for at fair value.
- Effects of transactions with related and certain other parties.
"We need better disclosure about these matters in this reporting season," said SEC Chief Accountant Robert Herdman, in a statement. "While existing rules mandate explanations of material uncertainties, our hope is that public companies will go beyond the minimum legal requirements and serve investors with the very best possible discussion of the company's financial position and operating results. The Commission will continue to study how it can bring about further improvements in disclosure concerning critical accounting policies, important assumptions underlying reported results and material off-balance sheet activities, among other topics."
The Commission's statement refers to recommendations contained in a petition for interpretive guidance from the five largest accounting firms, which was recently endorsed by the American Institute of Certified Public Accountants (AICPA). "Generally, we believe that the quality of information provided by public companies in the three areas identified in the petition should be improved," the SEC said in its statement. "Because many companies are currently preparing disclosures for fiscal 2001 annual reports, the Commission believes it is appropriate to issue this statement so that public companies can consider the petition and this statement in preparing year-end and interim financial reports and other disclosures made after the issuance of this release." See details of the SEC's order.
Today in Enron: FBI Pays a House Call
Consider it a corporate intervention.
One day after a former employee accused other Enron employees of shredding company documents, the FBI marched into the energy company's Houston headquarters to gather evidence, according to published reports. Enron management claims it invited the investigators, according to the accounts.
On Monday night, former Enron executive Maureen Castaneda told ABC News that her colleagues shredded documents from October through last week. Kenneth Marks, an attorney who is overseeing a huge shareholder lawsuit against Enron, Enron directors and officers, and auditor Andersen, claimed some shredding was going on up through Monday. "Until yesterday, we believed that practice was under way," Marks reportedly told US District Judge Melinda Harmo.
Investigators searching the 19th and 20th floors of Enron's Houston headquarters found one trash can with shredded paper, which they bagged and hauled away, Marks told Reuters.
In other Enron-related developments:
- President Bush defended his administration's handling of Enron's demise, but nevertheless promised that the government will do a better job protecting investors.
"Our administration has done the exact right thing," Bush claimed, referring to contacts between the White House and Enron. The president then went on to discuss the huge sums that vaporized from retirees' investment accounts. "A lot of shareholders didn't know all the facts and that's wrong," said Bush.
- Management at Accenture Ltd., the former consulting unit of Enron-auditor Andersen, said Tuesday it played no role in auditing the bankrupt energy company. "Accenture is not and never has been engaged in the practice of public accounting. Accenture had no involvement in Arthur Andersen's audit services, including audit services to Enron," Accenture management said in a statement.
Accenture management stressed it and Arthur Andersen LLP have been separate legal entities--and have operated independently--since 1989, the company noted.
In 1990, the SEC formally recognized Accenture LLP as an entity separate and distinct from Arthur Andersen LLP, Accenture added. "In August 2000, based on an arbitrator's decision in the International Chamber of Commerce proceedings commenced by Accenture in 1997, all remaining historical contractual ties between Arthur Andersen and Accenture were completely severed," the company added in its statement.
The Accenture statement may have come in response to reports yesterday that Sen. Barbara Boxer (D-Calif.) will propose legislation prohibiting accounting firms from providing consulting services to an audit client.
- The Public Oversight Board voted to shut down, noting it will not play a role in a new accounting oversight panel being created by the Securities and Exchange Commission. The POB was created in 1977 to mostly conduct peer reviews. How'd that turn out?
Bush fills two SEC vacancies
On Tuesday, President Bush temporarily filled two commissioner vacancies at the SEC.
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