WASHINGTON - Refining its crusade against so-called "earnings management," the Securities and Exchange Commission said it wants public companies, including banks, to disclose more information on reserve accounts.

The proposal - which the agency is expected to adopt within a few months - would require financial statements to include a "detailed narrative discussion" explaining how much a company has set aside in valuation and loss accrual accounts and why the amount of such reserves changes over time. The additional information would have to be disclosed annually, as well as any time the SEC requires an audited financial statement as part of other filings.

Criticism of the proposal has been fierce, especially from banks. Nearly all of the 60-plus companies that submitted comment letters during April complained that the proposal would force them to disclose confidential information that would benefit competitors. Bankers and others are concerned, for example, that revealing details of pending lawsuits would make it more difficult for them to reach favorable settlements.

"We cannot support disclosures that will impede the competitive business strategies of a company, compromise the confidentiality of proprietary information of a company, or severely hamper an entity's ability to negotiate settlements," wrote Joseph L. Sclafani, executive vice president and controller of Chase Manhattan Corp., in an April 17 letter.

The proposal is part of an SEC campaign to make the inner workings of public companies more transparent to investors, and it comes fresh on the heels of another pitched battle between banks and regulators over the handling of reserves.

In 1998 the SEC started targeting banks' loan-loss reserves in an effort to crack down on earnings manipulation. In a particularly high-profile case, the agency forced Atlanta-based SunTrust Banks Inc. to restate its 1996-98 earnings upward to reflect reserves that exceeded what was required by accounting standards. The movement was very controversial among industry officials and regulators, some of whom argued that banks should maintain high reserve levels to protect against default.

But the Gramm-Leach-Bliley Act of 1999 muted the controversy by barring the SEC from forcing banks to reduce loan-loss reserves without first consulting bank regulators.

The current proposal differs from the loan-loss controversy because it only seeks additional disclosures in financial documents while, in the SunTrust case, the SEC had tried to enforce an accounting standard that prohibited banks from including a reserve for a particular loan when setting general reserves.

Under its current proposal the SEC would require detailed statements about two types of reserve accounts: valuation and loss accrual accounts. A valuation account is a special account established to offset fluctuations in the value of various assets or liabilities. But if a company underestimates an anticipated loss, it would reserve the difference in a loss accrual account.

Regarding litigation, management would have to discuss its views on the outcome, as well as how much the bank is reserving in the case of an unfavorable settlement or decision. Banks fear that such disclosures could be used against them as admissions of guilt or give opposing attorneys an advantage in settlement negotiations by giving them a target amount.

Banks also expressed concern about disclosing confidential information related to tax disputes with the Internal Revenue Service. The proposal could give the IRS an idea of how banks calculate their risk in tax disputes and could force banks to reveal their tax strategies.

But the SEC maintains that "changes in valuation and loss accrual accounts often have a significant impact on income statement results and earnings trends."

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