On October 27, 2010, the Financial Accounting Standards Board (FASB) decided that its proposed amendments to disclosure of loss contingencies, including litigation contingencies, will not be effective for the 2010 calendar year-end reporting period. This postpones the effective date for public entities that was proposed in the July 20, 2010 Exposure Draft. According to the FASB, "[it] will decide on an effective date at a future meeting, after it has substantially concluded its redeliberations."
The Exposure Draft would replace and expand disclosure requirements for loss contingencies that are (or would be) treated as liabilities in a statement of financial position. The FASB received more than 300 comment letters from constituents in response to the Exposure Draft, including one prepared by Jones Day and signed by the general counsels and senior litigation counsel for 20 large U.S. corporations.
The FASB has not announced a schedule for the final standard. The FASB staff currently is reviewing the comment letters and developing a project plan, which it hopes to present to the FASB by the end of the year. The 2010 Exposure Draft reflected a substantial change from an earlier exposure draft, issued in 2008, on the same topic. The FASB received nearly 250 letters in response to the 2008 Exposure Draft. With 300 comment letters on the 2010 Exposure Draft, there is clearly work to be done.
Timing may also be affected by the fact that the FASB itself is in a state of flux. Effective October 1, Leslie Seidman became acting chairwoman, after Robert Herz retired. The FASB voted 3 to 2 to release the 2010 Exposure Draft, and Mr. Herz had been one of the three. In addition, the Foundation that designates FASB members has stated that it is expanding the board to seven members from five. It is expected to fill the new positions by early next year.
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