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 the "Dear CFO Letter" that the SEC sent to many public companies in October 2010. The FASB staff will review public filings for the 2010 calendar year-end reporting cycle to determine whether those efforts have resulted in improved disclosures. FASB also stated that it will resume deliberations at a future meeting.
FASB's postponement of its decision and further deliberations means that the proposed changes to the disclosure standard will not apply to calendar year-end companies' 2010 Forms 10-K and will also likely delay the project until the second half of 2011.
For additional information about the FASB proposal, please see our earlier client memorandum Uncertain Trends in Loss Contingencies (http://tinyurl.com/dbrfasb) and our earlier article FASB Proposes Changes to Loss Contingencies Disclosure Requirements in our September 2010 Securities Update ( http://tinyurl.com/dbrsu0910 ). The 2010 Exposure Draft is available at http://tinyurl.com/fasbed . The SEC's "Dear CFO Letter" is available at http://www.sec.gov/divisions/corpfin/guidance/cfoforeclosure1010.htm .
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