Sarbanes Oxley Act Section 401

 

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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