The Financial Accounting Standards Board has issued an exposure draft of a proposed standard for expanding the required disclosures of certain loss contingencies.
FASB said that investors and other users of financial information have expressed concerns that the current disclosures required in FASB Statement No. 5, "Accounting for Contingencies," do not provide enough information to help users of financial statements assess the likelihood, timing and amount of future cash flows associated with loss contingencies, such as liabilities arising from litigation.
The proposed statement would expand disclosures about certain loss contingencies in the scope of FASB Statement No. 5 or FASB Statement No. 141 (Revised), "Business Combinations."
This proposed statement would enhance disclosures about loss contingencies that are (or would be) recognized as liabilities in a statement of financial position. It would expand the population of loss contingencies that are required to be disclosed, require disclosure of specific quantitative and qualitative information about those loss contingencies, require a tabular reconciliation of recognized loss contingencies to enhance financial statement transparency, and provide an exemption from disclosing certain required information if disclosing that information would be prejudicial to an entity's position in a dispute.
FASB is asking for comments on the proposed statement by August 8. The disclosures would be effective for annual financial statements issued for fiscal years ending after Dec. 15, 2008, and interim and annual periods in subsequent fiscal years.
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