Dejected by yet another new direction in merger and acquisition accounting, the Financial Accounting Standards Board is taking a major step back in its call for fair value for contingencies.

In redeliberating planned guidance around how to account for contingencies in the context of a business combination, FASB decided to revert to language in old standards to answer the concerns about how to apply Financial Accounting Standard No. 141R: Business Combinations. The board said it will revise FAS 141R to say that assets or liabilities taken on in a business combination and arising from a contingency should be recognized at fair value if fair value can be “reasonably estimated.” That would strike the original FAS 141R requirement to recognize such items at fair value if fair value can be “determined.”

If an entity decides fair value of such an asset or liability can’t be reasonably estimated, then it would revert to existing guidance in FASB Statement No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss, according to FASB’s plan. FASB also decided to remove from FAS 141R the guidance around when and how to value such contingencies after they’re initially brought into an entity’s books.

The board has taken plenty of heat over calling for fair-value measurement of various contingencies, or issues such as lawsuits, warranties, or environmental liabilities where the outcome isn’t know on a financial statement date. Attorneys have said the requirement infringes on attorney-client confidentiality provisions and would lead to disclosure of information that would prejudice the outcome of the contingency.

“This is our version of Ground Hog Day,” said a frustrated FASB Chairman Robert Herz. “We’re now on our fifth iteration, probably, of this, starting with the original development of 141R. And I don’t think we’re going to resolve all this until we resolve the bigger issues” around recognition, measurement, and disclosure of contingencies more broadly beyond business combinations.

Further, FASB agreed it will amend FAS 141R to eliminate a requirement to disclose a range of estimates related to given contigencies, and it will eliminate contingent consideration from the scope of the planned staff guidance. Contingent consideration covers earnouts or other kinds of arrangements that establish future payments to a seller based on performance of an acquired entity.

Greg Rogers, president of Advanced Environmental Dimensions and an attorney focused on environmental liabilities, said the new approach represents a significant retreat from FASB’s original call for fair value for all contingencies. “FASB just did not plan or give adequate consideration to the lawyers and the implications of fair value being applied to contingencies,” he said. “This is a short-term fix to buy time while they try to fix the situation more permanently.”

FASB is working on new disclosure requirements for FAS 5 with long-term plans of eventually rewriting FAS 5 in step with the International Accounting Standards Board.

“Unquestionably, there’s a tension between confidentiality and transparency,” said Rogers. “How that tension is going to be resolved, I don’t know. It’s going to take some time.”