Regulators weigh in with policies related to Hurricane Katrina.

Soon after Hurricane Katrina's devastation of the U.S. Gulf Coast in late August, regulators issued policy announcements for issuers, preparers, investors and others impacted by the disaster.

The U.S. Securities and Exchange Commission (SEC) Chairman Christopher Cox responded to the hurricane's wrath by mobilizing SEC resources to provide emergency regulatory relief to affected investors, companies and securities firms.

"In the face of such desperate conditions, we've got to do everything humanly possible to help our fellow citizens. No one in the region should have to worry about attempting to file government documents in near-impossible circumstances," Chairman Cox said. In addition, he said the agency is working to get information from law and accounting firms with offices in the region and will soon publish a notice extending the filing deadlines for those affected by the disaster. "We are also working to ensure that individuals and families who suddenly find themselves in desperate financial circumstances have access to representatives of securities firms that hold their assets," he added.

The SEC divisions and offices that oversee publicly traded companies, accountants, mutual funds, brokerage firms and transfer agents, among others, are preparing relief measures that will include extensions of filing deadlines and suspension of requirements to deliver documents to hurricane-affected areas. The relief will also enable broker-dealers to provide access to accounts held at offices that are no longer operable. The commission is also working with banking agencies and self-regulatory organizations as appropriate.

The commission established both telephone and email hotlines to provide immediate responses to questions or to hear from those that want to advise the commission of their needs. Additionally, the SEC said it planned to consult with public companies based in the disaster area, to ensure that commission mandates do not interfere with response and recovery. Also, the commission will continue to assess the impact of the hurricane on shareholders, customers, employees and the capital markets and take all necessary steps to assist in the recovery.

To prevent additional hardship for Katrina's victims, the SEC Division of Enforcement is on the lookout for Katrina-related securities scams and reports it will vigorously prosecute those who attempt to take advantage of this tragedy.

The Financial Accounting Standards Board (FASB) announced that it is taking the same position for recording items on financial statements for Hurricane Katrina as it took following 9/11. Losses from Hurricane Katrina do not warrant "extraordinary item" treatment leading to a separate line on the income statement below income from continuing operations. Such accounting treatment is rare and reserved for gains or losses stemming from events or transactions "that are distinguished by the unusual nature and by the infrequency of the occurrence," according to rules of the Accounting Principles Board, a part-time predecessor of FASB (APB Opinion No.30), writes BNA Daily Report for Executives of Sept. 6.

The FASB position, as explained by spokesperson Gerard Carney in a prepared statement, is that "As tragic as hurricanes and other natural disasters are for everyone affected, unfortunately every year many businesses across the country are affected by these types of events and, thus, they do not represent an unusual and infrequent occurrence to businesses or to insurers." He noted, however, that although extraordinary item treatment "may not be appropriate, current accounting standards do permit separate 'one-line' breakout of the effects of such events on the face of the income statement, with amplification through full and informative disclosure."

Criticized for its decision in 2001, the Emerging Issues Task Force (EITF) of the FASB explained that it was difficult to capture the economic effects of the Sept. 11 attacks in companies' financial statements, and suggested that it was hard to peg specific impacts to the terrorist attacks since some economic weakening was evident in the economy in the weeks prior to the event itself. Other experts say companies could explain costs and losses in footnotes.

The FASB task force meets again in mid-September (after this October issue goes to press) and could look into the issue more closely. Get the most updated information from the Web sites of FEI, FASB and SEC at www.fei.org, www.fasb.org and www.sec.gov, respectively.