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To: Les H who wrote (4726)	1/11/2003 9:59:06 AM
From: Les H	Respond to of 29597

Fannie Mae objects to accounting rule changes reuters.com Fri January 10, 2003 04:09 PM ET By Mark Felsenthal WASHINGTON, Jan 10 (Reuters) - Fannie Mae FNM.N , the No. 1 U.S. home loan finance company, has told the Securities and Exchange Commission that proposed accounting changes will cloud investors' ability to get a clear view of corporate financial health. The SEC is due to decide Jan. 15 on stricter rules governing how publicly traded companies report their earnings each quarter. The changes are part of a slew of new protections aimed at preventing accounting abuses such as those that led to the high-profile collapse of energy trader Enron ENRNQ.PK and at restoring investor confidence in the battered U.S. corporate sector. Fannie Mae expressed concern about a rule prohibiting companies from reporting financial results on a "pro-forma" basis without explaining how they differ from the standard U.S. accounting rule book. The proposed pro-forma rule attacks the problem of companies reporting profit figures that ignore various costs, departing from nationally recognized standards know as the Generally Accepted Accounting Principles, or GAAP. Pro-forma reporting took hold in the late 1990s, especially among high-flying technology and telecommunications companies anxious to burnish their bottom lines. Despite recent bad publicity, the practice remains commonplace. Fannie Mae, in a Dec. 17 comment letter to the SEC, said restricting a company's ability to show what it thinks is the most accurate reflection of its finances will make it harder, not easier, for investors to asses the firm's profitability. "Prohibiting a company from disclosing certain key financial performance measures on which it relies to manage the business and assess the quality of its earnings does not facilitate full disclosure. We believe this restriction will diminish rather than enhance transparency, and in some cases may mislead investors," Fannie Mae vice presidents Jonathan Boyles and Scott Lesmes wrote. The company was due to post the letter to its Web site on Friday. The issue affects Fannie Mae directly because unrealized losses from derivatives required the company, which buys mortgages from lenders and repackages them as securities for investors or holds them in its own portfolio, to report a 19 percent drop in earnings in the third quarter. The effect of those derivatives aside, the company would have recorded an 18.4 percent rise in earnings. Many investors agreed with the company that pro-forma, or operating, earnings were the true reflection of the company's performance, and the value of its shares rose 7 percent on the report. Fannie Mae reports its fourth quarter earnings next week.