Earlier this July, the Financial Accounting Standards Board published an exposure draft for comment, Contingencies (Topic 450): Disclosures of Certain Loss Contingencies. (Most of us know this as Financial Accounting Standard No. 5.) This is the board’s second attempt at addressing contingencies; its previous attempt in 2008 received 241 comment letters—mostly unsupportive.
The board added this project to its agenda based on a perceived sentiment by investors and other users that current disclosures about loss contingencies—that is, losses a company might suffer, but the outcome is still uncertain—don’t provide adequate and timely information to assess ...