Reporting standards -- despite their complexity -- should be an exercise in honest communication, not merely an exercise in compliance, regulators and standard-setters told attendees at a financial reporting conference here.

But representatives from the Financial Accounting Standards Board and the Securities and Exchange Commission agreed that distilling the complexity of current standards remains at or near the top of their respective 2005 to-do lists.

"U.S. GAAP has 2,000 pronouncements and is difficult to use. In technical terms, it's nuts," quipped Robert Herz, chairman of the Norwalk, Conn.-based FASB, at the annual financial reporting conference at Baruch College.

Toward that end, Herz outlined FASB's ongoing codification project, under which the standard-setter is working to integrate existing U.S. generally accepted accounting standards into a single source, where all pertinent information relevant to a category is housed in one place. FASB embarked on that ambitious effort after 95 percent of those participating in a FASB survey supported the codification.

"Clearly this is a multiple-year project," said Herz. "But the purpose of the project is not to change GAAP."

He explained that one of the phases of the massive codification project included trimming the number of organizations that were issuing accounting guidance.

"There was water coming out of a lot of different faucets," Herz said. He added that in the near future, FASB will subject its early codification efforts to an outside verification process.

Scott Taub, deputy chief accountant at the Securities and Exchange Commission, recapped the projects underway at the commission, which include a reiteration of its support of FASB 123R, stock option expensing, and the ongoing convergence project with U.S. GAAP and international financial reporting standards, as the commission is currently completing its 2005 review of filings using IFRS.

"We're preparing for the day that foreign registrants do not have to reconcile from IFRS to U.S. GAAP," Taub said.

Taub also told attendees that at the end of the month, the financial watchdog would release its previously announced study on off-balance sheet activities, which he said would not only include special-purpose entities - such as those made famous by Enron - but would also address such areas as pensions, leasing and asset transfers.

Other SEC projects include its pilot program for filers to use Extensible Business Reporting Language, or XBRL.

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