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INTRODUCTION I have reviewed an article and financial disclosures by Chevron Inc pertaining to Y2K disclosure reporting The article SEC Interpretative Release on Disclosure of Year 2000 Issues by Gary Illiano and Joseph Bentz addresses the issue of reporting Y2K losses Reporting Y2K losses is a contingency issue and should not be ignored or reported ambiguously The SEC has made this a mandatory disclosure for material losses due to the Y2K issue effective November 9 1998 The SEC requires companies to disclose information on the issue in their Managements Discussion and Analysis of Financial Condition and Results of Operation Portion of their annual and quarterly reports The guidelines for this are in located in the Staff Legal Bulletin No 5 However companies have not been providing sufficient disclosure information To provide a more stringent guideline in the reporting the SEC has recently issued an interpretative release In this paper I will discuss the reason for disclosure and what needs to be disclosed I will also discuss the Readiness Disclosure issued by Chevron Inc REASON FOR DISCOSURE Disclosure of Y2K information is relevant to a companys current and future financial status Investors have the right to know what money has been invested in Y2K projects to date as well as future estimates of Y2K costs Companies may not only be spending large amounts of capital on fixing replacing and changing systems but they may also lose large amounts if third parties that the company is involved with are not Y2K compliant From a companys standpoint a good reason to disclose as much information as possible is to avoid possible litigation from the investors or third parties WHAT TO DISCLOSE The company must address four main categories of information 1State of readiness This includes describing the material event information about the IT systems and non-IT systems status of the process they are undertaking to correct Y2K problems and third party issues 2Costs
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