Technical committee profile: Committee on Corporate Reporting.

When the Securities and Exchange Commission (SEC) elected earlier this year to delay by five months the effective date of implementing Section 404 of The Sarbanes-Oxley Act, a major voice influencing that decision was FEI's Committee on Corporate Reporting (CCR), which told the agency first-hand about the difficulties companies were having in meeting the deadline.

Impacting policies and regulations governing U.S. and multinational companies has been a hallmark of CCR. The committee, which began in 1966, has become one of the most influential corporate voices affecting accounting and reporting policy, with regular contacts between members and agencies like the Securities and Exchange Commission and standard-setters like the Financial Accounting Standards Board (FASB).

Most committee members are controllers of Fortune 100 or other very large public companies that are household names in corporate America: IBM Corp., Cisco Systems Inc., Pfizer Inc., Comcast Corp., General Electric Co., Procter & Gamble Co. and Exxon-Mobil Corp., to name a few. Appointments are subject to annual renewals, but most members serve as long as they remain qualified, actively participate and are interested in serving.

As currently configured, CCR has 45 members and almost as many alternates, many of whom are direct reports to members and support their participation on the committee. The committee meets four times a year, and has three active subcommittees that separately meet four times annually. Those subcommittees are liaisons to the FASB and IASB (International Accounting Standards Board), the SEC and the Public Company Accounting Oversight Board (PCAOB). Each CCR member must serve on one of the subcommittees.

Constant Airing of Views

The subcommittee meetings afford the members extensive private discussions with the affected regulator or standardsetter, meaning that FEI's views are constantly being factored into accounting and reporting policy. The one exception to the private meetings is a two-hour public meeting with the entire FASB board that takes place at the June meeting each year.

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Chairman Frank H. Brod, vice president and controller of The Dow Chemical Co. in Midland, Mich., concedes that "you've got to really be an aficionado of financial reporting" to get the most out of a CCR meeting. But he adds something commonly heard within FEI--that "topically, and from the impact on members, it's FEI's most influential committee."

Regulators and standard-setters "do come to us to ask questions and get the registrants' or the preparers' perspective," Brod says. While the Business Roundtable and the Institute of Management Accountants (IMA) have also wielded considerable influence with the agencies, he suggests their clout has been waning, while FEI's has risen. Face-to-face meetings "are important, because they allow us to suggest agenda items and to get direct feedback," he says. "We can then carry messages back to the preparer community."

To supplement its personal meetings with the agencies, CCR periodically issues comment letters staking a position on a particular issue or rule--commonly in response to the agencies' own requests for comments. Most letters originate from one person or several on the relevant subcommittee, Brod says, and are circulated to other members of the subcommittee, and to him, before eventually being voted on by the entire CCR membership, where a two-thirds majority vote is required before the letter can be filed.

Plenty of Activity

Given the amount of activity these days at the SEC, PCAOB and FASB, there's plenty for the subcommittees to focus on. Several CCR members also participate in FASB project working groups, as well as the standing advisory group of the PCAOB, Brod notes. "That's very important, because one of our major concerns has been how the audit standard for Section 404 would come out. We're very concerned about the cost of compliance, versus the benefits to users. We were also concerned how internal audit was to be involved, and now that standard was loosened up somewhat."

CCR members are also actively involved in driving content for the annual Current Financial Reporting Issues (CFRI) conference, held in New York each November. Some 10 to 15 members take part in helping shape the agenda and identify the speakers.

Asked about the general issue of accounting convergence, Brod says that it "is a challenge, and it creates a lot of uncertainty. You've got to put it in the context of the post-Enron era, where there is emphasis on enhancing the integrity and credibility of financial information. But there's nothing worse than having a lot of changes in the rules."

Looking at the challenges to corporate controllers like himself in the coming months, Brod says that Section 404 compliance will stay at the top of the list. "It will be interesting to see how many organizations have qualified opinions on internal controls," he says, adding, "[CCR] is very much tied to FASB's focus on fair value--it's probably our biggest concern." He's convinced that FAS 133--the accounting standard on derivatives--and FIN 46, which covers special-purpose entities, "were mistakes. They're so complicated that we fear things have come to a point where even very knowledgeable organizations have uncertainty" that they can follow the rules. Such complex and detailed standards demonstrate the hazards of rules-based standards setting, he says, adding, "We prefer principles-based standards."

Brod compliments the FEI staff members working with CCR--Christine DiFabio, CPA, Director of Technical Activities; former SEC staffer Edith Orenstein, who prepares summaries about regulatory activities; and Executive Assistant Maria Zadravac--for their work in organizing the meetings, refining the agendas and using a stream of emails to keep members current on reporting developments. He also credits President and CEO Colleen Sayther Cunningham--herself a former corporate chief accountant with a deep interest in accounting and reporting issues--with using her knowledge and clout to help FEI make its voice heard.

"We get information more quickly than the auditors do," Brod says proudly. "It helps show how in tune our organization is with the topical activities going on. The staff is very effective, and it's helpful that we have people that monitor and contact the agencies" on important issues.

Given CCR's legacy of high-level advisory work, it's probably not surprising that the committee has a waiting list. Brod says that service on the committee "does help all of us, especially with issues like 404, where we've been able to compare and benchmark" activities and responses on the major regulatory issues facing companies today.