FASB Reproposes Disclosure Requirements for Loss Contingencies

The FASB has republished for comment proposed amendments to the accounting standard for disclosure of loss contingencies. The reproposal responds to comments on the FASB’s original proposal issued in June 2008. That proposal would have significantly expanded both the universe of contingencies to be disclosed and the scope of the required disclosures, and it attracted strong criticism, notably from public companies and the private bar. The FASB has called for comments by August 20, 2010 and proposed that the amendments would take effect in time for 2010 annual reports.

The reproposal is a considerable improvement over the 2008 approach. That said, even among those who concede the importance of a fresh look at ASC 450, the reproposal continues to call for a disclosure framework that is unworkable in several important respects and exposes companies to significant prejudice in pending proceedings, as well as to meaningful risk of additional liability based on the new disclosures. We summarize the main points of the reproposal, and highlight a number of concerns it raises, in the alert memorandum.