Accountancy firm KPMG Peat Marwick is recommending that companies disclose in their annual reports uncertainties about whether key customers and suppliers are year 2000-compliant.
KPMG made the recommendation with the release of its 1998 New Zealand Model Annual Report, a tool for company chief financial officers and chief executives.
The report, which comes out each year as a guide for disclosure, is based around a fictitious company. It explores the arrangement, presentation and compliance aspects of financial and non-financial information for a listed New Zealand company. In 1998 it has focused on the Y2K problem and urged companies to go further with disclosure than previously.
KPMG partner Joanna Perry says a company that has ensured it is year 2000-ready internally may still be exposed by the lack of readiness of its suppliers and customers.
“For instance, if you rely on a bureau for throughput of your information, it’s just as important the bureau is Y2K-compliant.
“Similarly, if you are a supermarket with direct electronic interface to grocery suppliers, you need to ensure you can cope with the new millennium.
“What’s important here is that the weak link in the Y2K compliance can be in any part of your organisational chain.”
The Model Annual Report urges organisations to be restrained about promising a hassle-free introduction to 2000.
“Discretion in this case is advisable,” says Perry. “It is important that shareholders don’t think the issue is totally fixed because no one will really know until the day.”
Although disclosure is not mandatory, KPMG’s report recommends making it. “We recommend directors keep stakeholders fully informed of the progress they are making in tackling the year 2000 problem,” says Perry. “By addressing the issue up front, speculation will be minimised.
“Y2K is a key interest area. Everybody’s talking about the problem and arguing about how to fix it,” says Perry.
“We think everyone should be disclosing uncertainties and risks to their organisation.”