fei
financial executives
international

December 20, 2002

Mr. Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Subject: File No. S7-42-02

Dear Mr. Katz:

The Committee on Corporate Reporting ("CCR") of Financial Executives International ("FEI") appreciates the opportunity to respond to the Securities and Exchange Commission's (the "Commission's") Proposed Rule: Disclosure in Management's Discussion and Analysis About Off-Balance Sheet Arrangements, Contractual Obligations and Contingent Liabilities and Commitments ("Proposed Rule") Release nos. 33-8144 and 34-46767. FEI is a leading international organization of 15,000 members including Chief Financial Officers, Controllers, Treasurers, Tax Executives, and other senior financial executives. CCR is a technical committee of FEI, which reviews and responds to research studies, statements, pronouncements, pending legislation, proposals, and other documents issued by domestic and international agencies and organizations. This document represents the views of the CCR and not necessarily the views of FEI.

Overall, we are supportive of the Commission's initiatives in the enhancement of disclosures regarding off-balance sheet arrangements, contractual obligations and contingent liabilities. However, we are very concerned with the Proposed Rule to lower the threshold for MD&A disclosure relating to off-balance sheet arrangements. We believe lowering the threshold for MD&A disclosure from "reasonably likely" to "more than remote" will result in less meaningful disclosures because there will be a vast increase in the quantity of disclosures, the very extent of which will outweigh meaningful disclosures about higher probability matters.

Furthermore, we are concerned with the Commission's lack of guidance in the Proposed Rule regarding transition, especially in light of the fact that the Proposed Rule includes additional requirements than the Commission's views expressed in FR-61, Commission Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations. For example, the Proposed Rule's definition of off-balance sheet arrangements would include residual value guarantees in leasing arrangements, equity derivatives accounted for as equity instruments and many other loss contingencies. These additional disclosure items, coupled with the lowering of the disclosure threshold, will require registrants to perform an extensive review of each off-balance sheet arrangement. We believe this review would require a significant amount of gathering of additional information that may not be able to be effectively collected in the short time frame for the 2002 10-K. Therefore, we strongly recommend that the Commission clarify that the disclosure requirements in the Proposed Rule are not required for the 2002 Form 10-Ks; but instead they should be required for the third quarter 2003 Form 10-Qs.

We appreciate the Commission's consideration of these important matters and welcome the opportunity to discuss any and all issues with the Commission at its convenience. If you have any questions regarding this letter, please feel free to call Frank Brod at (989) 636-1541 or David Sidwell at (212) 270-1892.

Sincerely,