Addresses requirement that financial statements and related disclosure fairly present a company's financial condition and results of operations

• Fairly presents is often used in standard contractual representations and warranties, typically with specific reference to GAAP
• Fairly presents is now used in the CEO / CFO certifications that were mandated by the Sarbanes-Oxley Act, without reference to, or qualification by, GAAP
• SEC's view is that compliance with GAAP is not sufficient - and does not fairly present - if it fails to provide a materially accurate and complete picture of a company's financial condition, results of operations and cash flows

• SEC invokes Rule 12b-20 in this context

United States v Simon (2nd Cir 1969)

• Conformity to GAAP did not prevent jury from finding that financial statements failed to fairly present company's financial condition
• 425 F.2d 796 (2d Cir. 1969)

In re Caterpillar Inc (SEC C&D 1992)

• Failed to separately discuss the results of a foreign subsidiary in MD&A, even though GAAP didn't require separate financial statements

In re Edison Schools Inc (SEC C&D 2002)

• Use of gross revenue and expense items, instead of net revenue, didn't provide an accurate view of company's results
• SEC press release

SEC citation

• Note: Simon, Caterpillar and Edison Schools are cited by SEC in its Release adopting final rules for CEO / CFO certification pursuant to Sarbanes-Oxley Act § 302
• See Release 33-8124
• At note 56, Release also cites Rule 12b-20

Disclosure Issues

CEO / CFO certifications

SEC "Additional Information" Rules