Ford Motor Company

Patricia A. Little
Director of Accounting
One American Road
Dearborn, Michigan 48126

December 9, 2002 P>VIA EMAIL (

Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: File No. S7-42-02
Proposed Rule Implementing Section 401(a) of the Sarbanes-Oxley Act of 2002

We appreciate the opportunity to comment on the proposed rule to enhance MD&A disclosure of off-balance sheet arrangements, contractual obligations and contingent liabilities and commitments. We applaud Congress' and the Commission's desire to improve corporate disclosure of on- and off-balance sheet obligations. There are, however, a number of ways we think the proposed rule could be improved.

Clarification of Scope of Disclosures of Contingent Liabilities or Commitments. We are concerned about the scope of proposed new paragraph (a)(5)(ii) of the Item 303 of Regulation S-K. Specifically, the proposed rule would require either tabular or textual disclosure of the expected amounts or range of amounts of contingent liabilities and commitments that are expected to expire in less than one year, from one to three years, from three to five years, and more than five years. Examples of contingent liabilities given in the proposing release are standby letters of credit, lines of credit, guarantees and standby repurchase obligations. These examples are all financial in nature. However, the language of the proposed rule would appear to apply to a broad universe of contingent liabilities, such as those relating to product warranties, pension fund contributions, matching 401(k) contributions and other known but uncertain payment obligations. Given other initiatives to require disclosures of these items, as discussed below, we wonder if this breadth is intentional or whether, as indicated by the examples given, the scope should be limited to those contingent liabilities that are financial in nature.

In addition, it's unclear what is meant by "expected" in relation to the amounts of contingent liabilities. Does or should this term have reference to the standards for accrual under SFAS No. 5? For example, if the fruition of a contingent liability is deemed remote, then is its "expected" amount zero? If its fruition is reasonably possible (i.e., more than remote but less than probable) how should the "expected" amount of the contingent liability be calculated? Should it be calculated on the basis of a weighted average of probabilities of occurrence? To ensure consistency of interpretation among issuers of how expected amounts of contingent liabilities are to be calculated, we suggest that the Commission provide detailed guidance, through definitions or otherwise, in this regard.

Coordinate Proposed Rules with Other Initiatives. Recently, the Financial Accounting Standards Board adopted FASB Interpretation No. 45 ("FIN 45") relating to accounting for and disclosure of guaranties and indemnities. Of course, the guaranties and indemnities to which FIN 45 applies also can constitute contingencies and commitments covered by the proposed rule. In addition, the Commission's proposed rule (Release Nos. 33-8098 and 34-45907) on critical accounting policies ("Critical Accounting Policies Rule") could apply to certain contingencies also covered by the proposed rule. For example, FIN 45 and the Critical Accounting Policies Rule will or would require substantial quantitative disclosure in respect of our product warranties.

If the proposed rule's disclosure requirements relating to contingent liabilities and commitments are construed broadly to also apply to product warranties, then three separate disclosure requirements will require us to have substantial quantitative and qualitative information about our product warranties in potentially three separate places in our Form 10-Ks and Form 10-Qs. We fear such similar and repetitive information will be confusing to investors and, in any event, inconsistent with the principles of plain English.

Transition Timing. It will take considerable effort and resources for us to identify and calculate our contractual obligations required by new paragraph (a) (5)(i) of Item 303. In addition, depending upon how broadly the phrase "contingent liabilities and commitments" is defined and how "expected" amounts thereof are to be calculated, extensive surveys of our operations may be required to gather the necessary information. Following this, the amount or range of amounts of contingent liabilities will have to be calculated.

With all the other new disclosure and accounting rules that are or will be applicable to our 2002 report on Form 10-K, if the proposed rule also were to apply, our already stretched financial reporting resources may become overwhelmed. We urge the Commission to provide issuers with sufficient transition timing to allow them ample time to comply with the extensive disclosure requirements of the proposed rule.

Should you have any questions concerning or would like to discuss our comments, please feel free to contact me by telephone at 313-845-9255 or by email at


/s/ Patricia A. Little

Patricia A. Little
Director of Accounting