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.
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:
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.
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John R. Formica, Jr.
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