NEWS RELEASE 07/30/02

FASB Issues Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities

Norwalk, CT, July 30, 2002—The Financial Accounting Standards Board (FASB) has issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity.

Previous accounting guidance was provided by EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Statement 146 replaces Issue 94-3.

In commenting on the standard, Linda A. MacDonald, FASB Project Manager, stated "Liabilities represent present obligations to others. Because a commitment to a plan, by itself, does not create a present obligation to others, the principal effect of applying Statement 146 will be on the timing of recognition of costs associated with exit or disposal activities. In many cases, those costs will be recognized as liabilities in periods following a commitment to a plan, not at the date of the commitment."

Statement 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.

The Statement may be ordered on-line or by telephoning the FASB’s Order Department at 800-748-0659.

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Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors and others rely on credible, transparent and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.

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