TR2 The Year 2000 Issue: Summary

• accounting for costs of modifying computer hardware and software to achieve Year 2000 compliance;
• revenue and loss recognition principles;
• possible impairment issues;

• and the disclosure of the Year 2000 compliance.

In Summary

• Costs incurred, both external and internal, for the Year 2000 compliance should be expensed as and when incurred and if the amount is material, should be disclosed separately as an expense item within the income statement. In the circumstance where an enterprise has an accounting policy to recognise and capitalise computer hardware or software as a separate identifiable cost, the cost of improvement, including those incurred to achieve Year 2000 compliance, should be capitalised only to the extent that the expenditure incurred, which can be measured reliably, enhances the standard of performance beyond its previously assessed standard.

• Hardware inventories, software inventories and products containing embedded software or computer-chips which are not Year 2000 compliant should be written down to their net realisable values when it is apparent that the Year 2000 issue has rendered unrecoverable the full historical costs of the inventories or products to be sold, leased, or otherwise marketed.

• Revenues from sale or lease of hardware inventories, software inventories and products containing embedded software or computer-chips should be recognised in accordance with MASB Approved Accounting Standard, IAS 18. Where it is evident that any such sale, lease or otherwise marketed product would give rise to significant uncertain product-warranty or product-defect liability or to significant unpredictable product-return, revenue recognition should be postponed.

• Costs and losses of product-warranty, product-defect liability and product-return associated sales of hardware, software and products containing embedded software or computer-chips affected by the Year 2000 issue should be accounted for in accordance with MASB Approved Accounting Standard, IAS 10.

• Impairment of computer systems and other fixed assets, and changes in depreciation methods and rates of fixed assets, arising from the Year 2000 issue should be accounted for in accordance with MASB Approved Accounting Standard, IAS 16.

• When management is aware, in making its assessment, of material uncertainties related to the Year 2000 issue which may cast significant doubt upon the enterprise's ability to continue as a going concern, those uncertainties should be disclosed. When the financial statements are not prepared on a going concern basis, that fact should be disclosed, together with the basis on which the financial statements have been prepared and the reason why the enterprise is not considered to be a going concern.

• Disclosure requirements:

  • where the Year 2000 issue is material, a note to explain accounting treatment of the Year 2000 compliance costs, the amount capitalised, and total included in the capital expenditure commitments;

  • assessment of the significant risks and uncertainties associated with the Year 2000 problem peculiar to its business and operations. If no assessment has been made, that fact should be disclosed;

  • the general plans to address the Year 2000 issue; and

  • whether the total estimated costs of these plans, including future capital commitments have been quantified and where applicable, an indication of the total costs likely to be incurred with an explanation of the basis on which the figures are calculated.

  
  Effective Date : 31 July 1998