Y2k Reporting For Fasb Essay, Research Paper
Introduction
I have reviewed an article and fiscal revelations by Chevron, Inc. refering to Y2K revelation coverage. The article, SEC Interpretative Release on Disclosure of Year 2000 Issues by Gary Illiano and Joseph Bentz addresses the issue of describing Y2K losingss. Reporting Y2K losingss is a eventuality issue and should non be ignored or reported equivocally. The SEC has made this a compulsory revelation for stuff losingss due to the Y2K issue effectual November 9, 1998. The SEC requires companies to unwrap information on the issue in their Management s Discussion and Analysis of Financial Condition and Results of Operation Portion of their one-year and quarterly studies. ( The guidelines for this are in located in the Staff Legal Bulletin No. 5 ) . However, companies have non been supplying sufficient revelation information. To supply a more rigorous guideline in the coverage, the SEC has late issued an interpretive release. In this paper I will discourse the ground for revelation and what needs to be disclosed. I will besides discourse the Readiness Disclosure issued by Chevron, Inc.
REASON FOR DISCOSURE
Disclosure of Y2K information is relevant to a company s current and future fiscal position. Investors have the right to cognize what money has been invested in Y2K undertakings to day of the month every bit good as future estimations of Y2K costs. Companies may non merely be passing big sums of capital on repair, replacement, and altering systems, but they may besides lose big sums if 3rd parties that the company is involved with are non Y2K compliant. From a company s point of view, a good ground to unwrap as much information as possible is to avoid possible judicial proceeding from the investors or 3rd parties.
WHAT TO DISCLOSE
The company must turn to four chief classs of information:
1. State of preparedness
+ This includes depicting the material event, information about the IT systems and non-IT systems, position of
the procedure they are set abouting to rectify Y2K jobs, and 3rd party issues.
2. Costss to Address the Company s Year 2000 Issues
+ Historical and estimated future costs of Y2K conformity
3. Hazards of the Company s Year 2000 Issues
+ Worst instance scenarios and how the company plans to manage them. Must study estimation material gross loss due to Y2K issues.
4. Company s Contingency Plan
There are many other suggestions of extra information to unwrap mentioned by Illiano and Bentz in the article. These should wholly be taken into history when a company analyzes their hazards. It should describe every bit much as possible to minimise the possibility of judicial proceeding from investors.
CHEVRON CORPORATION DISCLOSURE
Of all the companies that I reviewed their revelation statements that I reviewed, the most elaborate was issued by Chevron Corporation. Chevron has been publishing a Readiness Disclosure study since March of 1998. It has disclosed that its historical cost through December 31, 1998 is $ 75 million. Estimated cost to completion is $ 250 million. The company besides reports that these costs are outlooks, estimations and projections, which could finally turn out to be inaccurate ( Chevron, 4 ) . It besides discusses the possible internal and external environmental effects, such as, failure to accomplish expected production and future environmental ordinances, severally. The statement briefly notes possible liability ensuing from pending or future judicial proceeding. It does non, nevertheless, discourse what pending judicial proceeding there is at this point.
Decision
The SEC requires twelvemonth 2000 revelation of historical and future losingss. Companies must describe all information impacting them with respects to province of preparedness, costs ( past and hereafter ) , hazards of the company, and any eventuality programs presently in topographic point. These revelations are necessary to supply investors with the information they are entitled to and to minimise the possibility of judicial proceeding.
