Project Updates
Disclosure of Certain Loss Contingencies
Last Updated: October 14, 2009 (Updated sections are indicated with an asterisk *)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
Project Objective
Due Process Documents
Decisions Reached at the Last Meeting
Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information
Project Objective
The objective of this project is to enhance the disclosure requirements for loss contingencies under FASB Statement No. 5, Accounting for Contingencies.
Due Process Documents
The Board issued an Exposure Draft, Disclosure of Certain Loss Contingencies, on June 5, 2008. The comment period ended on August 8, 2008.
Comment Letter SummaryDecisions Reached at the Last Meeting
At the August 19, 2009 meeting, the Board began redeliberations of disclosure requirements for certain loss contingencies. The Board decided to initially focus its deliberations on loss contingencies associated with litigation and to consider other types of loss contingencies at a future meeting.
The Board decided on the following disclosure objective:
The Board decided on the following broad principles for disclosures about loss contingencies:
- Disclosures about litigation contingencies should focus on the contentions of the parties, rather than predictions about the future outcome.
- Disclosures about a contingency should be more robust as the likelihood and magnitude of loss increase and as the contingency progresses toward resolution.
- Disclosures should provide a summary of information that is publicly available about a case and indicate where users can obtain more information.
The Board decided that entities should not consider the possibility of recoveries from insurance or indemnification arrangements when assessing whether a contingency should be disclosed.
Regarding quantitative disclosure requirements, the Board directed the staff to develop an approach that would focus on disclosure of nonprivileged quantitative information that would be relevant to making an estimate of the potential loss, for consideration by the Board at a future meeting.
The Board decided not to require entities to disclose information about settlement negotiations.
The Board decided to require disclosure about possible recoveries from insurance and other sources if and to the extent that the information has been provided to the plaintiff in discovery.
The Board discussed the effective date of any final guidance on this project and decided not to rule out the possibility that it could be effective for fiscal years ending after December 15, 2009.
Next Steps
The Board will continue redeliberations of disclosure of certain loss contingencies at a future meeting.
*Board/Other Public Meeting Dates
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
Below is a list of the FASB Board/Public meetings. Minutes for meetings generally are posted within two weeks following the meeting.
| *August 19, 2009 | Board Meeting—Plan for redeliberations, effective date, disclosure objective, broad principles of disclosure, threshold for disclosure, quantitative disclosures, settlement negotiations, and possible recoveries |
| March 6, 2009 | Roundtable Meeting:—Disclosure of Certain Loss Contingencies |
| September 24, 2008 | Board Meeting—Plan for Redeliberations |
| March 11, 2008 | Board Meeting—Amended Disclosure Requirements |
| September 6, 2007 | Board Meeting—Agenda Decision |
Background Information
In March 1975, the Board issued Statement 5 (codified as Topic 450) to address the accounting for contingencies. Since that time, Topic 450 has affected the accounting for many transactions that involve some component of uncertainty.
At the September 6, 2007 meeting, the Board added a project to its agenda on the accounting for certain nonfinancial liabilities and contingencies, including loss contingencies under Subtopic 450-20. Originally, the Board decided to conduct this project in two phases: a short-term phase to amend and enhance the disclosure requirements for loss contingencies under Section 450-20-50 and a long-term phase to comprehensively reconsider the recognition and measurement guidance for certain nonfinancial liabilities. However, on June 11, 2008, the long-term phase of this project was removed from the Board's agenda because the Board plans to consider at a future date whether to address that accounting in a joint project with the IASB.The project now focuses exclusively on loss contingency disclosures. The project was undertaken to address constituents' concerns that the disclosures about certain loss contingencies under existing guidance do not provide sufficient information in a timely manner to assist users in assessing the likelihood, timing, and amounts of cash flows associated with loss contingencies. To address these concerns, the Board issued an Exposure Draft, Disclosure of Certain Loss Contingencies. The proposed Accounting Standards Update would expand the disclosures about certain loss contingencies by replacing the disclosure requirements of Section 450-20-50 for those loss contingencies with the new, enhanced disclosure requirements in the proposed Update.
Contact Information
William Hildebrand
Practice Fellow
wdhildebrand@fasb.org