FASB Provides Update on Proposed Changes to Loss Contingency Standard

As we have discussed in earlier memoranda, the Financial Accounting Standards Board (FASB) has proposed new standards for required disclosures of possible losses and liabilities (the 2010 Exposure Draft). The proposed changes to the accounting guidance for loss contingencies, ASC 450-20 (formerly FAS 5), generated over 200 comment letters—many of which recommended that the standards should not be changed. At its meeting on November 10, 2010, FASB discussed the comments received on the 2010 Exposure Draft and the major issues to be reconsidered.

Though it did not adopt any of the proposed changes to ASC 450-20 or reach any decisions at the November meeting, FASB did direct its staff to work with the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board to understand the efforts of those groups in addressing investor concerns about the disclosure of loss contingencies through increased focus on compliance with existing rules, such as