FASB Postpones Changes to Loss Contingency Disclosure Requirements Amid Widespread Criticism
By Thomas A. Zaccaro & Adam D. Schneir
The Financial Accounting Standards Board (FASB) has proposed significant amendments to Accounting Standards Codification Topic 450 (ASC 450), previously known as Statement of Financial Accounting Standards No. 5, which governs the disclosure of certain loss contingencies. According to FASB, the purpose of these revised standards is to enable financial statement users to understand the nature of loss contingencies, their potential magnitude, and their potential timing (if known). The proposed changes, which were published for comment on July 20, 2010 in an Exposure Draft (Exposure Draft), however, would significantly change the current loss contingency disclosure obligations of public and private companies by lowering the disclosure threshold and requiring the disclosure of additional qualitative and quantitative information. While these revised standards still seem to be under consideration, FASB recently postponed their implementation indefinitely amid widespread criticism.