ICI Strongly Supports SEC "Critical Accounting" Proposal

Washington, DC, July 22, 2002 - An SEC proposal to require critical accounting policies disclosure in corporate issuers' quarterly and annual reports will benefit investors, according to a recent Institute comment letter.

The Institute expressed strong support for several provisions of the proposal, which would require disclosure in the Management's Discussion and Analysis (MD&A) section of quarterly and annual reports, including a proposed sensitivity analysis enabling investors to assess the degree to which a company's reported results are susceptible to changes in accounting estimates.

The Institute believes the SEC approach will enable investors to focus on accounting estimates that involve significant management judgment, and to understand the impact of those estimates on the results of operations and financial position. In addition, the Institute recommended that the SEC take steps to ensure the accuracy and reliability of the proposed disclosures by requiring them to be examined by the issuer's independent auditor.

In response to an SEC request on whether issuers should be required to describe the effects of alternate accounting policies available under GAAP, the Institute recommended that the SEC require issuers to describe the effects of alternate available policies only if the accounting policies the company employs are different than those typically used by competitors in its industry. The Institute also urged the SEC to move forward with a proposal requiring issuers to provide an MD&A summary describing the most important factors in determining financial results and condition.