Donald Nicolaisen, chief accountant for the Securities and Exchange Commission, is leaving public office in October to return to the private sector, but not before taking a few minutes to share some of his departing thoughts about the agency’s future.

One major initiative will be “to follow up on the report we issued earlier this year on off-balance-sheet activity,” he told CFO.com. “We need to reduce the complexity of virtually every aspect of financial reporting and increase transparency,” added Nicolaisen, noting that such reform will need support from both the Financial Accounting Standards Board and the Public Company Accounting Oversight Board.

Another major challenge, said Nicolaisen, involves helping companies stay up-to-date with technology that can improve the speed of financial reporting as well as accuracy of and access to materials. This past spring, in fact, the commission established the XBRL Voluntary Filing Program for electronic filing by registrants.

Nicolaisen also maintained that the SEC itself, as well as the companies it oversees, could make better use of such technology. Indeed, earlier this year, the Government Accountability Office issued a report calling on the commission to repair material weaknesses in its financial internal controls. The report cited the SEC’s “extensive and time-consuming manual procedures” to put together quarterly subsidiary ledgers as a way of updating its accounting system. The commission has previous stated that it is working to address the issue with new software.

Those three issues are among eight priorities for the SEC’s Office of the Chief Accountant in the 2006 fiscal year. Nicolaisen declined to go into greater detail about the remaining issues he’s put on the agenda.

During his tenure, Nicolaisen has played a prominent role in the implementation of Section 404 of the Sarbanes-Oxley Act — especially in the SEC’s decision to postpone the effective date several times — and supported the efforts of small companies to scale back certain provisions. He’s also backed FASB’s controversial efforts to require the expensing of stock options.

Nicolaisen — who was appointed by former SEC chairman William Donaldson in 2003, following the scandals of the late 1990s and the enactment of Sarbanes-Oxley — looks back on his contribution with pride. “I was delighted to be a part of the team that helped calm that situation,” he said, “and think we’ve been successful in returning a degree of confidence to the capital markets and improving financial reporting.”

Asked about his departure, Nicolaisen noted that his decision was based mostly on his feeling that he had accomplished his goal to “make a difference.” He also acknowledged, however, that “commuting on a weekly basis from New Jersey to D.C.” took a personal toll. “There comes a time when you say enough is enough,” he said.

Nicolaisen, who joined Price Waterhouse in 1967 and was a senior partner at PricewaterhouseCoopers when he was appointed to the commission, hasn’t decided just where in the private sector he’d like to be. Something “interesting and challenging” is all he can say for now.

As for the Financial Accounting Standards Board:

FASB appears to have heard the call for change on off-balance-sheet transactions. Last Wednesday the board exposed for public comment its clarified guidance on how companies should approach the consolidation of so-called variable interest entities, an issue it first addressed following the collapse of Enron Corp. The proposed staff position would standardize the approach for determining the variability from cash flow and fair value when applying FASB Interpretation 46R, which requires that companies consider the design of the entity.

This Wednesday, the board will discuss whether to provide practical implementation guidance related to a requirement in FASB Statement 123R. The requirement, which would establish the grant date of a share-based award, deals with a mutual understanding between a company and an employee of the key terms and conditions of the payment arrangement.

FASB will also consider a working draft of definitions of insurance terms and related guidance; address effective-date and transition issues for a proposed standard on fair value measurements and a staff position relating to certain derivative contracts; and revisit guidance for other-than-temporary impairment.

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