In brief: FASB votes to discontinue loss contingencies project (No. 2012-23)
In brief
After a long hiatus on its loss contingencies project, the FASB voted today to remove this controversial project from its agenda. This In brief article highlights the project history and some of the reasons cited by board members for discontinuing the project.
What's new?
After a long hiatus on its loss contingencies project, the FASB voted today to remove the controversial project from its agenda. Some of the reasons cited by board members for discontinuing the project were:
- Improved compliance with existing disclosure requirements as a result of increased SEC focus on loss contingencies
- Constituent feedback opposing the changes proposed in the Exposure Drafts issued by the FASB in 2008 and 2010
- The FASB's disclosure framework project, in which the FASB will take a broad look at all disclosures. The board may decide to consider improvements to loss contingency disclosures within the scope of that project.
- Feedback from FASB Advisory Committees that the project on loss contingencies is a low priority
Project history
In 2007, the FASB added a project to its agenda to address concerns expressed by the users of financial statements that disclosures about loss contingencies, particularly litigation contingencies, do not provide adequate and timely information to assist them in assessing the likelihood, timing, and amount of future cash outflows associated with loss contingencies.
The FASB issued two Exposure Drafts, the first in 2008 and the second in 2010, proposing changes to the required disclosures of loss contingencies. The changes proposed in both Exposure Drafts were strongly opposed by non-user constituents. The opposition was due, in large part, to the belief that the imposition of additional disclosures regarding litigation contingencies could be prejudicial to the reporting entity.
In late 2010, the SEC gave a series of speeches and issued a "Dear CFO" letter, which put constituents on notice that the SEC would be focusing on the disclosure of loss contingencies.
Questions?
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the National Professional Services Group (1-973-236-7804).
Authored by:
John R. Formica, Jr.
Partner
Phone: 1-973-236-4152
Email: john.r.formica@us.pwc.com
Nora Joyce
Managing Director
Phone: 1-973-236-4771
Email: nora.d.joyce@us.pwc.com
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