Year 2000Year 2000Only 654 Days LeftOnly 654 Days Left

presented bypresented by

Chaim Yudkowsky, CPAChaim Yudkowsky, CPA

Grabush, Newman & Co., P.A.Grabush, Newman & Co., P.A.410-296-6300 � �www.gnco.com � www.byteofadvice.com

The calendarThe calendar

� December 31, 1999 - Friday� January 1, 2000 - Saturday� January 2, 2000 - Sunday� January 3, 2000 - Monday

Experiences - Experiences - Real lifeReal life

� 10,000 medical bills (1972)� Invitation to school (1988)� Swedish food wholesaler� Golf� Yours?

Experiences - Experiences - ExpectedExpected

� “BGE has conceded that it can not solve all its Year 2000 problems before the end of 1999.”

� Airline industry - many will not fly the evening of December 31, 1999

� Banks want to shut down on Friday

Experiences - Experiences - PotentialPotential

� Power grids� Air traffic control

systems � Other embedded

systems� Payroll systems� Financial accounting

systems

� Social security� Mortgage amortization� Stock trades� Bank vault� Elevators� ATMs� EDI

CostCost

According to some studies, the cost could run $300 to $600 billion worldwide by the end of 1999 and solve less than 50% of all

problems!

The challengesThe challenges

� Problem: 00 instead of 0000– What does it mean?

– How to enter it?

� Leap Year thing

What is at risk?What is at risk?

� Hardware and the microchip (embedded systems)– April 1996!

� Software– Quicken

� Networking– Network operating systems

The myths - Part IThe myths - Part I

� A silver bullet exists� It’s just a mainframe problem� It’s just a software application problem� It’s just a COBOL problem� If your application is compliant - no need to

worry� A fixed system will not have problems� No need to worry about customers and suppliers

The myths - Part IIThe myths - Part II

� No one outside cares� No need to discuss this issue with an

attorney� It’s not your responsibility - it’s your

business advisor’s� There’s plenty of time� January 1, 2000 (or 3) will be an ordinary

day� The problem will not begin until 1/1/00

SolutionsSolutions

� Solutions . . .– Software

– Hardware

� University of Maryland - Year 2000 Fellowship

What you must doWhat you must do� Plan and analyze your risk� Test all your systems - Do they work?� Upgrade off-the-shelf where appropriate� Replace where appropriate� Hire programmers where appropriate� Consistently evaluate progress� Mitigate your risk relating to suppliers and service

providers� Consider business interruption insurance � Exclusions in policies effective April 1

What is going on? - DisclosureWhat is going on? - Disclosure

� AICPA recommendations for disclosure� Year 2000 and Congress for public

companies � SEC requirements for disclosure for public

companies� Banks

What is going on? - OtherWhat is going on? - Other

� Being forced by the consultant - liability insurance underwriting

� Raising the cost of good programmers� Not enough people� Whole industry of topical magazines and Web sites� Mutual fund that invests primarily in Y2K companies� Year 2000 warranties� Accounting for costs in fixing the problem - expensed� International fixes - E.U. and Third World concerns

JokeJoke

� After January 1, 2000, what will all the Y2K experts be doing?

Basis for litigationBasis for litigation

� Business interruption� Software licensing disputes� Negligence

Lloyd’s of London estimates a $1 trillion litigation potential!

LitigationLitigation

� Who gets sued?� Produce Palace International v. TecAmerica

Corp. (POS) - product defect– VISA determined that 99.7% of 14 million

merchants were compliant

� Atlaz International v. SBT (accounting sw) - breach of warranty

Year 2000 statistics - Year 2000 statistics - OverallOverall

� Loss of economic output (1998-2001): $119 billion� Cost of repair in the U.S.: $500 billion� Cost per line of code in the U.S.: $2.57� U.S. economic growth rate decrease in 1999: 0.3%� Number of person years to fix and test: 700,000� Number of PCs unable to handle: 80%� Number of vacancies for computer scientists and

programmers: 350,000

Year 2000 statistics - Year 2000 statistics - Government & Corp.Government & Corp.

� Cost to fix the IRS’ problem: $1 billion� Number of lines of code in IRS’ systems:

60 million� Earliest year for readiness by the Dept. of

Defense’s critical systems: 2012� Of America’s largest companies:

– <33% considered impact– 20% done anything– 7% have problems now

Top 10 reasons to do nothingTop 10 reasons to do nothing

� You’re planning to retire next year.� You want to surprise the stockholders.� January 1, 2000 falls on a Saturday - you’ll have lots of time over the

weekend.� Government will pass legislation to roll back the clock to 1900.� You don’t have a budget.� You believe in the Tooth Fairy.� Bill Gates will solve it.� Nostradamus never mentioned this problem.� Your multimillion-dollar company doesn’t rely on computers.� You’re already in Chapter 11.

Questions?Questions?