Chevron Texaco Corporation
May 23, 2002
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Proposed Rule: Acceleration of Periodic Report Filing Dates
and Disclosure Concerning Website Access to Reports û File No. S7-08-02
Dear Mr. Katz:
Thank you for the opportunity to comment on the subject proposal. ChevronTexaco fully supports the Commission's efforts to improve financial reporting and disclosures. However, for the reasons explained below, we strongly urge against shortening the filing period for Form 10-K to 60 days following a registrant's year-end and for Form 10-Q to 30 days following the end of interim periods.
Our responses to specific questions related to the filing due dates are as follows:
Justification in the proposed rule for accelerated filings includes the comment: "Over 30 years have passed since we last changed these deadlines. In the interim, advances in communications and information technology have made it easier for companies to process and disseminate information swiftly." At ChevronTexaco, we agree that technology has advanced tremendously in the last three decades. At the same time, however, the complexity of accounting rules and required disclosures have increased substantially û a condition given only passing reference in the rule proposal.
We believe the extra time needed to address increasingly complex and expanded disclosures far outweighs the time saved from technology improvements. To illustrate this point, we have attached a comparison of the content of our company's most recent filings with those of 30 years ago. Our Form 10-Q has grown from 2 pages to 30 pages; our Form 10-K has increased nearly fourfold û from 22 to 86 pages.
Our company's business model is essentially the same as three decades ago, that of a multinational, integrated petroleum company. Despite the benefits of technology, we produce the company's consolidated income statement and balance sheet only a couple of days faster today. Technology has helped us reduce the extensive use of accruals and estimates in closing the books for operations that span six continents. An acceleration of our interim and annual reports would be possible only with a step backwards in the use of accruals and estimates in lieu of actual results.
? Question: Are there ways other than our proposal to get important information out to investors sooner?
Response: The operative phrase here is important information. No information in our filings is superfluous; however, not all information in our filings is of equal importance. The information that should be provided most timely is information of material importance that has changed significantly from the previous filing.
Expanding the use of press releases, reports on Form 8-K and company Websites can help provide important information more timely and prevent material changes in trends from being disclosed for the first time in an annual or quarterly filing.
As examples, ChevronTexaco used press releases to furnish information to the public about the company's oil and gas reserve replacement for 2001, the company's capital and exploratory expenditure program for 2002 and various oil and gas discoveries. The company also published operating statistical data for the first two months of the fourth quarter 2001 on its Website prior to the end of December 2001.
Although we take pride in the modern and efficient technology we use to gather and process transactions and data underlying our company's financial statements, the fact remains that we operate in 180 countries around the world. In many areas, we do business through affiliates and joint ventures, and with trading partners whose reporting and closing schedules are not controlled by our company, but whose information is an integral part of our consolidated financial statements, accompanying notes and MD&A. Also, as the time required to prepare the financial reports has increased because accounting rules have continued to become more complex and financial disclosures more lengthy, likewise more time has been required for review by operating company and corporate management. As with the oversight provided by the audit committee of our board of directors, we do not expect a "rubber stamp" management review process. Sufficient time must be allowed for this important part of the process.
We believe our quarterly and annual closing process to be efficient and one that results in high quality reporting. If we are required to meet the accelerated filing deadlines, we will have to close the books sooner, with much greater reliance on the use of revenue and expense accruals. We believe such an outcome to be highly undesirable and not in the best interests of investors and the capital markets.
If the rule is passed as proposed, we strongly believe the investment community will be ill served if the quality of financial reporting deteriorates. We further believe that the root cause of many of today's highly publicized financial reporting issues center not around timeliness of information, but rather around factors such as adherence to existing disclosure rules, inappropriate accounting, poor business judgement and governance, and in some cases, leaders lacking moral conviction. Acceleration of annual and quarterly filings would address none of these root causes. An unintended consequence of the proposed accelerated reporting could be the timely delivery of lower quality information by many companies û a very unfortunate outcome.
/s/ S.J. Crowe
|Page Length of Filing||No. of Pages|
|First Quarter Form 10-Q||1972||2002|
|Table of Contents||1|
|Statement of Cash Flows||1|
|Notes (Selected comments in 1972; 11 Formal Notes in 2002)||1||10|
|Total Length of Form 10-Q||2||30|
|Table of Contents||1|
|Description of Business||1||19|
|Summary of Operations (Change in Capital)||0.5|
|Information about Executive Officers||0.3||2|
|Information about Directors and Officers||1.3||0.3|
|Change in Equity Securities & Number of Shareholders||0.5|
|Consolidated Net Assets||1|
|Financial Information of Affiliates||1|
|Schedule II- Allowances (Including M&I Reserves)||1|
|Schedule V-Gross PP&E||1|
|Schedule VI-Accumulated DD&A||1|
|Schedule XII-Balance Sheet Reserves||0.5|
|Schedule XIII- Common Stock Data (Authorized, Issued, Treasury)||0.5|
|Schedule XVI-Supplemental Income Statement Information (DD&A, Taxes)||1|
|Table of Subsidiaries||1||1|
|Definitions of Terms||1|
|Arthur Andersen Letter Representation||1|
|Financial Statements Table of Contents||1|
|Statement of Comprehensive Income||1|
|Statement of Earned Surplus||0.3|
|Statement of Changes in Financial Position/Statement of Cash Flows||1||1|
|Statement of Stockholders' Equity||2|
|Notes to the Financial Statements (7 in 1971; 21 in 2001)||1.7||21|
|Oil and Gas Tables||7|
|Table of Quarterly Results||1|
|Total Length of Form 10-K||22||86|