COMPANIES are to be required to disclose the risks and uncertainties for their business and operations stemming from the millennium bug, or year 2000 problem, under rules published by the Accounting Standards Board (ASB) today.
With the world-wide cost of fixing the problem said to be as much as pounds 400bn, many big companies are already disclosing significant estimated costs. The watchdog's Urgent Issues taskforce said that in most cases the costs incurred in meeting the problem through such means as modifying software should be written off to the profit and loss account.
The ASB also points out that details of risks and other unknowns that may threaten the existence of the business are even more important for investors than information on the costs incurred.
"Although the year 2000 problem is not the only risk faced by an entity, disclosure is justified by the pervasiveness and complexity of the issue and the extent of its possible effects," says the body, adding that disclosure may help accounts users distinguish between organisations that are planning for the issue and those that have not properly investigated it.
The taskforce is also today issuing rules for accounting for the introduction of the euro. While noting that the overall effect will probably not be as severe as the impact of the millennium bug, it says it will affect many businesses even if they are not located in states adopting the single currency.
It therefore says that where the potential impact is likely to be significant it should be disclosed in the narrative to the annual report and accounts. The ASB is urging companies to adopt the new rules as early as possible but, in any event, for accounting periods ending on or after 23 March 1998.
Sir David Tweedie, ASB chairman, said: "It is difficult to overstate the potential impact of the year 2000 problem. It follows that the costs of tackling it need to be properly accounted for and properly disclosed. But more important still, users of accounts need to be given a clear assessment of the risks involved for the enterprise in question."Reuse content