In her June 10 testimony to the Senate Subcommittee on Financial Service and Technology, Concerning Disclosure of Year 2000 Readiness, Securities & Exchange Commission Commissioner Laura Unger revealed that U.S. publicly traded companies are not telling the SEC very much about their y2k plans.
* * * * * * * * * *
To evaluate the Year 2000 disclosure that companies have provided, the Task Force reviewed the annual reports of over 1,000 public companies. Each of the companies selected for review by the Task Force included some type of Year 2000 disclosure. The selected companies represent a cross-section of the companies that file periodic reports with the Commission, including the Fortune 100 companies and 66 small business issuers. As part of the review, the Task Force attempted to determine if these companies were following the guidance in the revised Staff Legal Bulletin. Many companies are not.
Specifically, the Task Force read the Year 2000 disclosure in the filings of 1,023 public companies to see if they disclosed certain information based on the specific guidance provided in revised Staff Legal Bulletin No. 5: 10
Assessment - the extent to which the company has assessed the seriousness of its Year 2000 technology problems if no corrective action is taken. Assessment: Percentage About to be started 9%
Still in progress 56%
No disclosure regarding assessment 8%
Plan - the extent to which a company described its plan to remedy its Year 2000 technology problems.
General description 44%
Detailed description 9%
Plan is fully implemented 4%
No disclosure regarding plan 43%
Timetable - the time frame within which a company intends to complete its assessment and/or its remediation plan. The Task Force considered disclosure such as "in time" or "by the year 2000" as "No disclosure."
By the end of 1998 19%
Other than the end of 1998 17%
No disclosure regarding timetable 64%
Relationships - whether a company plans to evaluate or is evaluating the Year 2000 technology problems of those entities with which it has material relationships.
Disclosure regarding evaluation of material relationships 49%
No disclosure regarding evaluation of material relationships 51%
Historical Costs - the amount of money a company has already spent on Year 2000 issues to date.
Historical costs: Percentage
Disclosure regarding historical costs 8%
No disclosure regarding historical costs 92%
Estimated Costs - the amount of money a company estimates it will spend on Year 2000 issues.
Disclosure regarding estimated costs 22%
No disclosure regarding estimated costs 78%
Materiality - whether a company disclosed that the Year 2000 issue is material to its business and, if so, the level of materiality.
Year 2000 issues could be material 9%
Year 2000 materiality is unknown at this time 5%
Year 2000 issues are not material as to remediation costs or operations 67%
No disclosure regarding materiality of Year 2000 issues 19%
In many cases, the public companies disclosing that the estimated costs are not expected to be material also made cautionary disclosure that the company may be materially affected if third parties with whom it has material relationships are not Year 2000 ready. By including cautionary language, these companies may be seeking to protect themselves from liability for forward-looking disclosure, as provided by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. . . .
The Commission is concerned that while a greater number of companies mention Year 2000 in their annual reports, much of the disclosure is not informative.