The scandal that followed Enron's failure to disclose billions of dollars of debt held by off‐balance‐sheet entities (OBSEs) prompted investor interest in these entities and motivated auditors to request more accounting guidance. The SEC responded by issuing Financial Release No. 61 (FR‐61) to remind managers to follow SEC guidance for disclosures on liquidity and capital resources in the Management's Discussion and Analysis section of the annual report. FR‐61 identifies disclosure objectives but does not require specific disclosures. We study how the OBSE‐related disclosures of companies that sponsored OBSEs before Enron changed after Enron/FR‐61. We find that while OBSEs were widely used by S&P 500 firms before Enron/FR‐61, a majority of these firms either did not disclose their OBSEs or, if they did, provided little useful information. After Enron/FR‐61, OBSE disclosure levels increased significantly but not uniformly across firms. The pattern of increases suggests that FR‐61 reduced regulatory uncertainty and increased the perceived minimum level of required OBSE disclosure. Our results are consistent with the view that general guidance (of the type found in principles‐ or objectives‐based accounting standards) may result in underdisclosure or a large disparity in level of disclosure, and that reminders of responsibility and suggestions to consider specific disclosures partially remedy both problems.

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