American Society of Corporate Secretaries

December 18, 2002

Jonathan G. Katz, Secretary
United States Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

RE: File No. S7-42-02
Comments on Release No. 33-8144; 34-46767

Dear Mr. Katz:

On behalf of the American Society of Corporate Secretaries, Inc., we are pleased to have the opportunity to comment on "Proposed Rule: Disclosure in Management's Discussion and Analysis About Off-Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments." The Society has over 3,800 members representing over 2,500 corporations in the United States and other countries.

The Society recognizes the Commission's objective of implementing the legislative mandate of Section 401(a) of the Sarbanes-Oxley Act. We agree with the Commission's determination, prior to the Sarbanes-Oxley Act, that improvements in the quality of information with respect to off-balance sheet arrangements, contractual obligations and contingent liabilities and commitments is needed and desired. However, we believe that certain provisions of the proposal would burden companies without a corresponding benefit. We have included suggestions intended to simplify the proposed new requirements, with the goal of reducing the associated costs while still accomplishing the purpose of the proposal.

"Higher than Remote" Threshold

We believe that the proposed "higher than remote" disclosure threshold is too broad and would result in confusing disclosure for investors. First, the term "remote" is accounting terminology that is included in the complex provisions of SFAS 5. Attorneys who deal in SFAS 5 matters on a regular basis work typically consult an American Bar Association booklet (entitled "Auditor's Letter Handbook") to properly quantify exposures as "remote" (or another applicable category) when communicating with accountants. The complexities of the definition of "remote" and its application are not routinely covered by issuers elsewhere in disclosure documents. So even for those of our members who are plain English experts, the task of clearly communicating why various items are included would be challenging.

Second, the use of the "higher than remote" disclosure threshold could be confusing to companies, courts and investors because a different "reasonably likely" threshold would apply to most other disclosures in filings made with the Commission.1 The creation of a bifurcated disclosure framework just for off-balance arrangements that typically are merely financing vehicles does not appear to sufficiently benefit investors compared to the costs of confusion created by such a framework.

To summarize, the application of a "higher than remote" standard could have several unintended results, including a disproportionate emphasis on off-balance arrangements over other portions of MD&A that are more material to a particular issuer, and too much information about off-balance sheet obligations so that an investor would struggle to determine which are most likely to have negative impact.

Transition Period

We understand that the Commission is required by Sarbanes-Oxley to adopt a final rule by January 26, 2003. However, we are concerned that even the best intentioned companies will have difficulty complying for the first year due to a number of factors including certain definitional issues raised by other commentators and the large number of other accounting and disclosure rule proposals currently pending or recently adopted. As a result, we recommend the Commission adopt the final rule effective for fiscal years beginning no sooner than December 15, 2003.


American Society of Corporate Secretaries

Karen Doggett and Broc Romanek
Co-Chair, Subcommittee on Off-Balance Sheet Arrangements

cc: Hon. Harvey L. Pitt, Chairman
Hon. Paul Atkins, Commissioner
Hon. Roel Campos, Commissioner
Hon. Cynthia A. Glassman, Commissioner
Hon. Harvey Goldschmid, Commissioner
Alan L. Beller, Director, Division of Corporation Finance
Giovanni P. Prezioso, General Counsel
Jackson M. Day, Acting Chief Accountant
Alan L. Beller, Director, Division of Corporation Finance
Elizabeth M. Murphy, Chief, Office of Rulemaking, Div. of Corporation Finance
David Smith
Tom Sanger
Peggy Foran
Susan Wolf

1 In the text accompanying footnote 65 of Release No. 33-8144, the Commission notes "Therefore, "reasonably likely" is the existing disclosure threshold under which information that could have a material effect on financial condition, changes in financial condition or results of operations must be included in MD&A."