SEC supports disclosure simplification recommendations.

An internal study group of the Securities and Exchange Commission has recommended eliminating or modifying hundreds of rules and forms in an effort to improve the disclosure process. The Report of the Task Force on Disclosure Simplification contains 140 recommendations that, if implemented, would reduce the cost of securities offerings and increase smaller companies' access to securities markets. The SEC is expected to implement many of the recommendations in different stages as rule proposals, some of which have been proposed already.

The recommendations would affect CPAs with public clients; the report contains an entire section on changes in accounting disclosure for public companies. "One of the most pervasive changes that will affect public filings is the rule proposal to eliminate exhibit no. 11 for earnings per share," said Arthur J. Radin, partner of Feldman, Radin & Co. in New York City. "Most of the information in the earnings-per-share exhibit is covered in summary in the footnotes." He said the exhibit eventually would become irrelevant when the Financial Accounting Standards Board exposure draft, Earnings per Share and Disclosure of Information about Capital Structure, is standardized.

"The calculation of the schedule requirement for earnings per share was criticized in the past as being unduly burdensome for CPAs," said John W. Albert, associate chief accountant of the SEC in Washington, D.C. "This is just one example of the task force's suggestions for eliminating requirements and demands that outweigh the benefits." He said many of the regulations that were eliminated were duplicative or had outlived their usefulness. "From time to time the SEC regulations become outdated because of subsequent changes that have been developed through the FASB." The task force report also recommended eliminating a number of SEC staff accounting bulletins that were superseded or outdated. Thomas L. Milan, chair of the AICPA SEC regulations committee, said that this was a good first step at reevaluating accumulated rules and regulations. "I hope this signals a new direction for the SEC staff in maintaining its rules on an ongoing basis to reflect the realities of today's world."

Arthur Levitt Jr., chairman of the SEC, said the task force was asked to review rules and forms affecting capital formation, with "a view toward streamlining, simplifying and modernizing the regulatory system without compromising investor protections." With the suggestion of many outside experts, the task force recommended the elimination of 81 rules and 22 forms and the modification of many others. The task force also recommended the SEC continue its "plain English" initiatives and make other rule modifications to encourage disclosure that is more concise and readable. Other principal recommendations of the report include

* Permitting delayed offerings and simplifying reporting for smaller companies, such as providing modified shelf registration procedures to smaller companies that have filed timely public reports with the SEC for at least 12 months.

* Raising the dollar thresholds for disclosure in regulations S-K and S-X and updating other industry-specific disclosure requirements in the industry guides.

* Replacing the $100,000 threshold requirement for companies that disclose government environmental proceedings with a more flexible materiality standard, or raising the threshold to a higher dollar amount.

* Overhauling the rules on trading during securities distributions.

A second task force on capital formation and regulatory processes, headed by SEC commissioner Steven M. H. Wallman, is expected to recommend that 30% of all public companies be allowed to use a cheaper and simpler registration method to sell securities.

A free copy of the report can be obtained by calling the SEC office of publications at [phone], or on the World Wide Web at http://www. sec.gov.