FCA Info Memo - Disclosure of Year 2000 Costs

Informational Memorandum
Subject:	Disclosure of Year 2000 Costs
Date of Memorandum:	11/14/1997
Expiration Date:
Office:	OE
Signed By:	Smith, Roland
FCA Contact Person:	Glenn, Thomas
Contact Phone:	703-883-4412
List of Attachments:	None

INFORMATIONAL MEMORANDUM

November 14, 1997

To: Chairman, Board of Directors
Each Farm Credit Institution

The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Chief Examiner Roland E. Smith
Office of Examination

Subject: Disclosure of Year 2000 Costs

The cost and risk of adapting computer and related systems to handle the change to the Year 2000 has received substantial attention in private industry, media, Congress, and Federal banking regulators, including the Farm Credit Administration (FCA). Although precise measurements are perhaps too early to make, some estimates put the costs and legal liabilities associated with converting the nation’s computer systems at billions of dollars. In this regard, because of safety and soundness considerations, FCA is obligated to monitor the Year 2000 conversion for the Farm Credit System (System), a process that has already begun and will continue in the future.

The impact of the Year 2000 conversion has disclosure implications to the stockholders of System institutions and to investors of System debt. The Securities and Exchange Commission (SEC) recently announced rules requiring companies to advise investors about material Year 2000 risks they face. Further, the SEC recommended that companies presently estimating minimal Year 2000 risk should still advise investors where the entity stands in their disclosures. Concurrently, Congress in consultation with Federal banking regulators, has been reviewing financial disclosure plans of the financial industry to address the Year 2000 issue, including cost estimates for conversion.

FCA examiners' review of annual stockholder disclosures will determine if a reasonable effort was made to address the potential Year 2000 risk. It is recognized that any estimate made at this time is subject to subsequent adjustment. Nevertheless, stockholders and investors should be advised of any risks and management’s estimate of the cost, if any, of Year 2000 conversion, whether that cost is substantial or not. Farm Credit institutions should consult with their external auditors to determine how best to address this Year 2000 issue in the fiscal year 1997 annual disclosures.

Copy to: The Farm Credit Council
Federal Farm Credit Banks Funding Corporation
Farm Credit System Financial Assistance Corporation