Required Y2K disclosures.

• Author: Gauthier, Stephen

Both the Governmental Accounting Standards Board (GASB) and the U.S. Securities and Exchange Commission (SEC) have reminded state and local governments of the need to make certain disclosures regarding the Year 2000. The GASB's guidance can be found in GASB Technical Bulletin (TB) 98-1, Disclosures of Year 2000 Issues. The SEC issued its guidance in the form of Interpretive Release (Release) Nos. 33-7558 and 34-40277, Disclosure of Year 2000 Issues and Consequences by Public Companies, Investment Advisers, Investment Companies, and Municipal Securities Issuers.

GASB Guidance

GASB TB 98-1 indicates that state and local governments need to provide certain Year 2000 disclosures concerning in the notes to their financial statements to conform with generally accepted accounting principles (GAAP). The scope of the required disclosures is to encompass not only information systems, but also noninformation computer technologies that could affect a government's operations (e.g., equipment with embedded computer chips that are date sensitive). Specific required disclosures include:

1) amounts contracted with outside parties as of fiscal year end to resolve Year 2000 issues;

2) general description of the Year 2000 problem as it relates to the government;

3) a description of the stages of work in process or completed as of the end of the fiscal year to achieve Year 2000 compliance; and

4) additional stages of work necessary for making systems and equipment Year 2000 compliant.

GASB TB 98-1 defines the following four "stages" for purposes of the last two disclosures (which apply to each mission-critical system and other electronic equipment):

* awareness stage (establishing a budget and a project plan);

* assessment stage (identifying systems and components for which work is needed);

* remediation stage (making changes to systems and equipment); and

* validation/testing stage (validating and testing the changes made during the remediation stage).

It is important to note that governments are not expected to assert that any or all of their mission-critical systems or equipment are in fact Year 2000 compliant. Likewise, completion of the validation/testing stage is not considered tantamount to an assertion of Year 2000 compliance.

The effective date of GASB TB 98-1 is based upon the date of the auditor's report (i.e., the end of audit field work) rather than upon the period for which financial statements are being prepared. Specifically, the provisions of...