CPA Resources
CPA Resources

FASB issues guidance on disclosure of loss contingencies

NORWALK, Conn., June 5, 2008 — The Financial Accounting Standards Board has issued an exposure draft of a proposed Statement of Financial Accounting Standards, "Disclosure of Certain Loss Contingencies," an amendment of FASB Statements No. 5 and 141(R).

The proposed statement would be effective for fiscal years ending after Dec. 15, 2008, and interim and annual periods in subsequent fiscal years.

The purpose of the exposure draft is to obtain feedback from constituents on a proposed statement intended to improve the quality of financial reporting by expanding disclosures required about certain loss contingencies. Investors and other users of financial information have expressed concerns that current disclosures required in FASB Statement No. 5, "Accounting for Contingencies," do not provide sufficient information in a timely manner to assist users of financial statements in assessing the likelihood, timing and amount of future cash flows associated with loss contingencies. This proposed statement would expand disclosures about certain loss contingencies in the scope of FASB Statement No. 5 or FASB Statement No. 141 (revised 2007), Business Combinations.

"The Board believes the enhanced disclosure requirements outlined in the ED will significantly improve the overall quality of disclosures about loss contingencies, providing financial statement users with important information," states David Elsbree, FASB practice fellow. "Constituents are encouraged to review the ED and provide feedback on whether they believe the proposed Statement would indeed meet this objective."

The proposed ED invites individuals and organizations to submit comments on the proposed guidance. Responses must be received in writing by Aug. 8, 2008. Interested parties should submit their comments by e-mail to director@fasb.org, File Reference No. 1025-300. Those without e-mail may send their comments to the "Technical Director—File Reference No. 1025-300" to the address of the Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT, 06856-5116. Responses should not be sent by fax. All comments received by the FASB are considered public information. Those comments will be posted to the FASB website and included as part of the project record with other project materials.