In our July 23 update, we reported on a proposed rule from the Financial Accounting Standards Board (FASB) that would drastically revise the reporting rules on loss contingencies, requiring estimates of maximum loss exposure and an assessment of risk factors. As we reported, corporate and litigation counsel objected to the proposed rule as harmful to a client's interest, since adverse parties could find out this assessment and use it against the client.
The FASB apparently heard these objections. On September 24, the FASB announced that it will review alternatives and delay the effect of any rule change. In a Summary of Decisions Reached, the FASB announced:
"The Board decided on a plan for redeliberations of its Exposure Draft, Disclosure of Certain Loss Contingencies. The Board directed the staff to prepare an alternative model that attempts to address the concerns that certain constituents raised about the Exposure Draft. This alternative model will be field tested along with the model in the Exposure Draft. The staff expects that field testing will take place during November and December 2008, and roundtable meetings will occur in either early January or March 2009. Board redeliberations are expected to begin in late March or April 2009. The Board also decided that any final Statement on this topic will be effective no sooner than for fiscal years ending after December 15, 2009." (See the FASB website at: http://www.fasb.org/news/SDR_Contingencies_09-24-08.pdf )
While this is good news for attorneys and their clients, the FASB is still clearly concerned about disclosure standards. So we will watch developments as to any modified rule with great interest.