Government Accounting


New Y2K Disclosure Options

State and local governments no longer have to include Y2K disclosures in the notes to their financial statements. According to GASB Technical Bulletin no. 99-1, Disclosures about Year 2000 Issues , released in March, governments can include such disclosures as "required supplementary information."

The publication revises Technical Bulletin no. 98-1, issued last October, which specifically required governments to disclose Y2K information in the financial statement notes. According to GASB Chairman Tom L. Allen, the 1998 bulletin led many auditors—concerned about the uncertainty surrounding the year 2000—to issue qualified opinions.

Linda J. Blessing, CPA, director of the Arizona Department of Economic Security, the state's largest agency, told the JofA she was very disappointed that, for the first time in five years, her agency received a qualified opinion even though it had performed the necessary due diligence for Y2K readiness. "Requiring the disclosures in the notes made it impractical to receive a clean opinion on our 1998 financial statements," said Blessing.

The revised bulletin clarifies that the disclosures are meant to provide information about what the government is doing to address the Y2K issue, rather than to provide assurance of compliance. Required supplementary information has a far lower level of assurance than the information included in the notes to financial statements. The option to report the Y2K disclosures as required supplementary information likely will reduce the number of qualified opinions on financial statements.

The AICPA had worked closely with the GASB to resolve auditors' concerns about the earlier guidance. In its comment letter on the exposure draft of the 1998 bulletin, the AICPA had said it did not believe the proposed disclosures belonged in the basic financial statements, adding that the disclosures contained requirements that were neither assertable by the management nor verifiable by auditors.

The provisions of Technical Bulletin no. 99-1 are effective immediately and will terminate for financial statement periods ending after December 31, 1999, unless systems and other equipment are not Y2K-compliant as of the balance sheet date.


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