May 22, 2002
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
Mail Stop 6-9
450 Fifth Street, NW
Washington, DC 20549-6009
Re: Acceleration of Periodic Report Filing Dates and Disclosure Concerning
Website Access to Reports (File No. S7-08-02)
Dear Mr. Katz:
The Rouse Company (the Company) is pleased to respond to the request for comments on the proposals contained in Release No. 33-8089. The Company is a real estate investment trust (REIT) that has been publicly traded for more than 40 years and has been an active proponent of efforts to improve the quality of public financial reporting.
Acceleration of Quarterly and Annual Report Due Dates
We agree with the Commission's assertion that technological advances have increased the ability of companies to capture and process the data used to prepare the financial information presented in quarterly and annual reports. However, we believe that efficiencies associated with these technological advances have been more than offset by the time and effort required to apply the judgement, interpretive and analytical skills required to implement and comply with a growing and more complex body of accounting principles and disclosure requirements. The existing deadlines for Exchange Act reporting were established in 1970, when generally accepted accounting principles (USGAAP) consisted of the 51 Accounting Research Bulletins and 16 Accounting Principles Board Opinions. Since the establishment of the existing deadlines, USGAAP has grown to include 16 additional Accounting Research Bulletins and the entire body of work of the Financial Accounting Standards Board, including 145 Statements of Financial Accounting Standards and voluminous interpretive guidance. We expect the number of authoritative pronouncements from the FASB and the SEC to grow at an accelerated pace in the future as the standard setting bodies continue to try to keep pace with a business world that is ever-growing in complexity with regard to transactions, business organizations and financial instruments. The magnitude of change in USGAAP and its increasing complexity have necessitated a change in the focus of accounting from bookkeeping and data compilation to analysis, judgement and meaningful disclosure. While the information processing advances of the past 30 years have greatly reduced human intervention in data collection and compilation efforts, expanded disclosure requirements relating to more complex transactions, business organizations and financial instruments have increased the demands on enterprises, financial reporting professionals and independent auditors.
We believe that the efficiencies in data processing, compilation and analysis have provided enterprises with the ability to produce reliable financial information for release to the public in summarized form, but without the footnote disclosures that are an integral part of the financial statements. Following the closing of our books and records, our financial reporting team and the independent auditors perform rigorous analytical reviews of the results of operations in order to verify the quality of the bookkeeping and to discover and understand emerging or established trends that may influence future operating results. Upon completion of this review, the financial reporting team produces our consolidated segment reporting and summarized financial statements for inclusion in our press release and quarterly report to shareholders which are generally issued approximately 30 days after quarter end. The same resources then prepare and review required disclosures, including notes to the financial statements and management's discussion and analysis, and monitor and evaluate subsequent events. These functions are generally performed sequentially by the same personnel. We believe that the proposed acceleration of filing deadlines may adversely affect the quality and completeness of these disclosures.
We also believe that the proposed deadlines would present additional burdens on complex business organizations that have additional filing requirements pursuant to Section 210.3-10 of Regulation S-X. Many REITs own substantially all of their assets through consolidating operating partnerships that are not wholly owned. Some of these operating partnerships have issued debt securities of their own or guaranteed securities issued by their parents and are required to file full financial statements on Forms 10-Q and 10-K. Most of these operating partnerships and their parents share accounting and financial reporting staffs and auditors because the existing deadlines for these filings allow them to be prepared and reviewed sequentially. The proposed deadline accelerations will likely require some additional staffing as the Forms 10-Q and 10-K of the parent companies and operating partnerships will need to be prepared and reviewed simultaneously instead of sequentially.
Finally, we believe that the proposed acceleration of filing deadlines would shorten the opportunity for audit committees to review Exchange Act filings. We believe demands for more active oversight of financial reporting by audit committees are likely, and the acceleration of filing deadlines will make it more difficult for audit committee members to discharge their responsibilities. Accordingly, we believe the proposed acceleration of filing deadlines will make it more difficult to recruit and retain qualified directors to serve on audit committees. This is certainly not a desirable outcome.
Website Access to Information
We concur with the proposal that filings of reporting companies be made available free of charge on their websites. We do believe, however, that a hyperlink to the SEC's website should suffice.
Thank you for the opportunity to comment on Release 33-8089. Please contact me at (410) 992-6364 if you have any questions or would like to discuss further.
Melanie M. Lundquist
Vice President and Corporate Controller