Several organizations are criticizing a proposed standard on accounting for loss contingencies, saying it could lead to possible abuses, including a flurry of spurious lawsuits.

The proposed amendments to FASB Statements 5 and 141(R) would increase the amount of information that publicly traded companies are required to disclose about pending or threatened litigation. The U.S. Chamber of Commerce sent a letter to the Financial Accounting Standards Board outlining its opposition to the proposed rule change, saying it would open the door to "abusive" lawsuits by trial lawyers. The Chamber of Commerce claims the additional requirements would force companies to release immaterial or confidential information and could lead to excessive and harassing lawsuits.

"This proposed rule is nothing but a solution in search of a problem," said David T. Hirschman, president of the U.S. Chamber Center for Capital Markets Competitiveness. "The changes would invite excessive and abusive lawsuits against public companies and hurt U.S. global competitiveness."

The American Bar Association also sent a comment letter to FASB describing its own "serious concerns" with the proposed changes.

"The exposure draft, particularly as applied to contingencies arising from pending and threatened legal claims, raises a number of problems and will likely have unintended but seriously adverse consequences for reporting entities," said the letter. The ABA said the proposals would require disclosure of even remote contingencies that are likely to soon be resolved. The ABA noted the proposals go further than the requirements under international accounting standards, which only require the disclosure of contingencies that are more than remote.

Financial Executives International also registered its objections in a letter, saying two of its committees were "very concerned" about the implications of the proposed rules "on the accounting and disclosures of loss contingencies related to litigation; particularly the prejudicial effects these changes will have on ongoing and threatened litigation."

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