At a July 9, 2012 meeting, the Financial Accounting Standards Board (“FASB”) voted against moving forward with its outstanding exposure draft to modify the accounting and disclosure requirements for loss contingencies. The FASB considered two alternatives at the meeting: (1) remove the loss contingency project from its agenda; or (2) continue to explore moderate changes to the loss contingency requirements. The FASB Staff recommended that the Board remove the project from its agenda. Chairwoman Seidman and Board members Buck, Golden, Schroeder and Smith voted to remove the project from the Board’s agenda. The majority agreed that the current requirements under Accounting Standards Codification Topic 450 are sufficient and that addressing any concerns with the adequacy of loss contingency disclosures is an issue of compliance and enforcement rather than standard-setting. Board members Linsmeier and Siegel dissented, with each noting that the project should continue with a focus on providing additional guidance on qualitative disclosures about loss contingencies.
In her remarks, Chairwoman Seidman noted that the principles addressed in a soon-to-be released exposure draft on the overall financial statement disclosure framework will be relevant to the issue of loss contingency disclosures. The exposure draft is part of an FASB project announced in 2009 to establish an overarching framework designed to make financial statement disclosure more effective, coordinated and less redundant. Chairwoman Seidman stated that one of the primary principles to be included in the upcoming release is that what is relevant to investors changes over time and that issuers should evaluate each reporting period “what would investors want to know given changed circumstances.” She also noted that the release will discuss how to present disclosures so that the focus is more clearly on the most important information. Chairwoman Seidman stated that the FASB expects to issue the disclosure framework release in late July and will hold a number of interactive forums to generate feedback on the release.