FASB Prepares Proposals On Disclosure Of Loss Contingencies, More
Following are highlights from yesterday's FASB board meeting, at which the board discussed several proposals slated for release for public comment this quarter, including a revision to a controversial Exposure Draft released a couple of years ago on Disclosure of Certain Loss Contingencies. At yesterday's board meeting:
1. SEC Staff Announcement on: “Accounting for the Health Care and Educational Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act.”
a. The announcement addresses in particular questions related to the fact that there were two different signing dates associated with the two related acts (March 23 and March 30, respectively), and a limited number of companies may have year-ends that fall between the two dates.
b. As background: SEC Staff Announcements are made from time to time at FASB Emerging Issues Task Force meetings, in this case, due to the nature and timing of the issue, the Chairman of the EITF made the announcement at the FASB board meeting, on behalf of the SEC staff.
2. Disclosure About Certain Loss Contingencies:
a. A revised Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment second quarter, 2010 for a 30-day comment period.
b. Effective date of final standard: The proposed effective date would be fiscal years ending on or after Dec. 15, 2010 and interim and annual periods in subsequent fiscal years (see below for nonpublic entities). See FASB’s Summary of Board Decisions for details of decisions reached at yesterday’s meeting about quantitative and qualitative disclosures that would be required.
c. Nonpublic entities:
o Nonpublic entities would not be required to provide the proposed tabular reconciliation of accrued contingencies.
o The effective date of the final standard for nonpublic entities would be the first annual period beginning after December 15, 2010, and for interim periods of fiscal years subsequent to the first annual period.
NOTE - 'My two cents' (I remind you of the disclaimer posted in the right margin of this blog): FASB has done extensive outreach (including, in addition to reviewing comment letters on the earlier proposal, conducting a public roundtable, and inviting participants in field tests). But will the revised Exposure Draft on Disclosure of Certain Loss Contingencies address the concerns voiced by attorneys, preparers (financial executives), and others? As noted in some previous blog posts, even some of the more recent proposals floated at a FASB roundtable last year were not necessarily roundly or resoundingly concurred with, particularly by members of the bar; see our previous blog posts on this topic, here, here, here and here.
See also Broc Romanek's post in TheCorporateCounsel.net blog today, in which he notes:
[A]ttorneys in particular have expressed significant concerns that the proposed mandated disclosures could result in admissions against the interests of companies as well as result in waivers of the attorney-client privilege and attorney work product protection... Because of the comments received, the FASB decided in September 2008 to "re-deliberate" the issues raised by the proposal.
...[T]he FASB now has reached many decisions on this proposal - and plans to issue a new Exposure Draft sometime in May with only a 30-day comment period. Based on the notes, it appears that the concerns expressed by lawyers in the comment letters have not been fully addressed - but we will have to see the Exposure Draft to determine if that truly is the case (eg. requirement to make disclosures about certain remote contingencies under certain circumstances).
3. Disclosures about an employer's participation in a multiemployer plan.
a. An Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment second quarter, 2010, for a 60-day comment period.
b. The proposed effective date would be fiscal years ending after Dec. 15, 2010 (see below for nonpublic entities).
c. See FASB’s Summary of Board Decisions for details of decisions reached at the meeting about quantitative and qualitative disclosures that would be required.
d. Nonpublic entities: the proposed effective date would be the first annual period beginning after December 15, 2010.
4. Insurance contracts
a. The Board tentatively decided not to change the accounting for an insurer’s assets in this project, and decided not to permit or require the use of other comprehensive income for insurance contracts.
b. According to FASB’s Insurance Contracts project summary, an exposure draft of a proposed Accounting Standards Update is expected to be released for public comment in April, 2010.
5. Statement of Comprehensive Income
a. The board decided that in its upcoming proposed Accounting Standards Update:
1. to require full retrospective application,
2. Not to require any transition disclosures, and
3. To permit early adoption.
b. According to FASB’s project summary, an Exposure Draft of a proposed Accounting Standards Update is expected to be released for public comment in tandem with the Exposure Draft of the Financial Instruments project, originally slated for release in March, now slated for release second quarter 2010.
Refer to FASB’s Summary of Board Decisions for details on the above matters.