FASB Extends Effective Date of Proposed Changes to FAS 5, Contingencies; Adds Project On FIN 48 and Private Cos

At its board meeting earlier today, FASB agreed to conduct field tests this year, and hold a roundtable first quarter 2009, on its proposed changes to FAS 5, contingency disclosures. In light of comments received from the preparer and legal community (including FEI comment letters) on its earlier Exposure Draft, the staff has developed an alternative disclosure model to be included in the field test. Accordingly, FASB agreed to extend the effective date of the final amended standard to be effective no sooner than fiscal years ending after Dec. 15, 2009. FASB is looking for volunteers for the field test.

Among the concerns identified by the legal community mentioned today was that communications of attorneys regarding litigation reserve estimates and related disclosures could be discoverable. FASB board member Tom Linsmeier asked if a suggestion made earlier this week by Ralph Ferrara, Managing Partner of law firm Dewey & LeBoeuf LLP and a member of FASB’s Financial Accounting Standards Advisory Council (FASAC) had been considered; FASB staff said they would look into it. Staff emphasized the disclosures subject to the field test would encompass ‘closed cases’ so as not to divulge confidential information, they also noted they would be careful to try to avoid causing any problems with compliance with SEC’s Reg FD.
In other FASB action, Chairman Robert Herz announced an ‘agenda decision’ had been reached to add a project to FASB’s agenda to consider a potential deferral or modification to FIN 48, Uncertainty in Income Taxes, with respect to nonpublic companies. He added, “In the next few weeks we will discuss [this project] at a board meeting." If you're new to our blog and you'd like to receive emails of our posts, enter your email address here.

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