by the industry guides for companies with extended operating cycles highlight the economic assumptions underlying asset

valuation and liabilities subject to greatest uncertainties, information permitting evaluation of the impact on operations resulting in changes in those assumptions and amounts included in the current year's income which are adjustments of estimates included in prior years' income statements.

The second topic in this chapter, considerations for evaluating accounting standards, is a complex one which the Financial Accounting Standards Board is addressing in its Conceptual Framework Project. To further those efforts the Advisory Committee offers some observations and recommendations based upon its case study and also on the collective experience of its members. The Committee believes that in evaluating accounting standards consideration should be given to, among other things, (1) uncertainties inherent in the measurement process, (2) the amounts and timing of historical cash flows, and (3) the liquidity of the reporting entity.

The third topic in this chapter relates to

Regulation S-X. In some cases financial statements prepared in accordance with Regulation S-X differ from those prepared in accordance with generally accepted accounting principles ("GAAP"). The Advisory Committee recommends that the Commission undertake to eliminate all financial statement disclosure required by Regulation S-X which duplicate GAAP, critically

review all S-X requirements which are supplementary to GAAP, and eliminate those which are not necessary

to investment decision-making.

This recommendation reflects the Committee's view that although Regulation S-X must necessarily supplement GAAP because of the Commission's ability to deal quickly with emerging problems, some information currently required may not be useful to investors. This includes a number of the

schedules to the financial statements.

Special Problems of Small Companies (Chapter XVII)

There is ample evidence, including the results of the questionnaire and interview study, that the cost burden of periodic reporting to the Commission is relatively greater for small companies than for large companies.

The Advisory Committee strongly supports the idea of reducing the reporting burden for small companies. However, it recognizes that there must be an evaluation of several factors, including whether such a reduction is consistent with the Commission's objectives, and whether analysts' interest in small companies, already limited, would be further reduced.

The Advisory Committee concludes that more study is needed to assess the tradeoffs for small companies between reducing reporting burdens and the benefits of having a reliable public data base. Accordingly, the Commission should initiate an inquiry, including public hearings,

to determine if it is desirable and possible to define
a small company class of registrants, and if so, how to
reduce the reporting burdens for such registrants.

The Advisory Committee believes it important for the Commission to be more cognizant of the differences among registrants. Differentiating registrants by size, like differentiating by industry as discussed in the industry guides recommendation, may improve the corporate disclosure system to the benefit of both investors and registrants. Dissemination of Information (Chapter XVIII)

The Advisory Committee believes that the Commission has a responsibility to maintain a comprehensive, accessible repository of filed information, but that such information should also be reasonably accessible directly from registrants. To improve their usefulness, the

Commission's public files should be converted

from a statutory basis to a "company" basis, and a

"current" company file should contain each company's

latest Form 10-K and subsequent 1934 Act (10-Qs and 8-Ks) and 1933 Act filings. The Commission should also require

registrants to make all 1934 Act filings available to

shareholders on request and to non-shareholders at a reasonable cost.

Finally, the Advisory Committee recommends that the Commission be responsive to the information needs of holders of debt securities and warrants.

All company

reports normally made available to equity holders should also be made available to debt holders. These recommenda

tions are based upon the Committee's recognition of growing volume of new corporate bonds and the greater interest

in fixed income securities.

RECOMMENDATIONS

Chapter VII

That the Commission adopt the following statement of objectives:

The Commission's function in the corporate
disclosure system is to assure the public

availability in an efficient and reasonable manner
on a timely basis of reliable, firm-oriented infor-
mation material to informed investment and
corporate suffrage decision-making. The Commission
should not adopt disclosure requirements which
have as their principal objective the regulation of
corporate conduct.

Chapter IX

Regarding Commission rule-making and monitoring practices:

The Commission should initiate the rule-making process promptly after identifying a disclosure issue of general significance rather than proceeding exclusively through administrative or enforcement procedures. Prior to developing the text of a rule involving a major conceptual issue with which the Commission has had limited experience and concerning which there is limited conceptual literature, the Commission should publish a "concept release" identifying the matter being considered, discussing the issues presented and alternatives available and requesting public comment on the "concept" of the proposed new requirement.

Rules proposed for comment should be deemed withdrawn if not adopted or reproposed for comment in modified form within a specified period of time after the expiration of the most recent comment period. A release should be promptly issued to explain why no action was taken. Similarly, concept releases should be withdrawn if no action is taken after a specified period of time and reasons for the withdrawal should be announced.