Litigation Disclosures Controversial
The most controversial issue in the ED, which is being reissued after FASB considered the comments received on the original ED issued a few years ago, revolved around the enhanced disclosures on litigation contingencies.
Due to some critical feedback in the original comment letters on the prior ED, on litigation contingency disclosures in particular, FASB conducted additional outreach, including field tests and a public roundtable, before reissuing this ED.
Among the proposed changes noted in the ED (this is just one of the proposed changes):
The proposed amendments would retain the current qualitative disclosures and enhance them by requiring additional disclosures, for example, in the case ofNonpublic Companies Receive Some Disclosure Relief
litigation contingencies, disclosure of the contentions of the parties and how
users can obtain additional information about the litigation.
Similarly, in addition to the quantitative disclosures required under current U.S. generally accepted accounting principles (GAAP), the amendments in this proposed Update would require disclosure of publicly available quantitative information (such as the claim amount for asserted litigation contingencies), other relevant nonprivileged information, and, in some cases, information about possible recoveries from insurance and other sources.
Furthermore, a public entity would be required to provide tabular reconciliations, by class, of recognized (accrued) loss contingencies that present the activity in the account during the reporting period.
The ED is applicable to public and nonpublic companies, but proposes one point of disclosure relief for nonpublic companies, that nonpublic companies "would not be required to provide a
tabular reconciliation of accrued loss contingencies."
My Two Cents
(I remind you of the disclaimer which appears on the right side of this blog...) A 30-day comment period on a FASB Exposure Draft is relatively short, it could be because this is really a "reissued" ED on which FASB previously sought comment, and after doing more outreach as noted above, is trying to address the full set of comments (pro and con - i.e., what to keep to keep as is, what to modify) received on the original ED. However, I would urge you to read the ED carefully and to exercise your right to respond to the ED to note areas of concern, or areas you support, by filing a comment letter with FASB by the Aug. 20 deadline.
Some of our prior coverage of this issue can be found here and here.
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