The SFAS5 was originally issued in March 1975 to account for loss contingencies including potential losses from pending or threatened litigation. In September 2007 the FASB began to address concerns that SFAS 5 does not provide significant guidance and transparency as to the likelihood, timing, and amounts of cash flows associated with loss contingencies.
By June 2008 the FASB issued an Exposure Draft titled “Disclosure of Certain Loss Contingencies” with proposed amendments to SFAS 5 and 141(R). The changes would be primarily related to disclosures in company financial statements including potential losses from pending and threatened litigation.
After over 250 comments on the Exposure Draft, the FASB issued the following statement:
“The Board decided on a plan for redeliberations of its Exposure Draft, Disclosure of Certain Loss Contingencies. The Board directed the staff to prepare an alternative model that will attempt to address the concerns that certain constituents raised about the Exposure Draft. This alternative model will be field tested along with the model in the Exposure Draft. The Board also decided that any final Statement on this topic will be effective no sooner than for fiscal years ending after December 15, 2009.”
The redeliberations the FASB is considering are unknown, however examination of the Exposure Draft gives some indication of the areas of concern that will be addressed are related to disclosures of loss contingencies that do not meet the criteria necessary for accrual of the loss.
The new Exposure Draft is scheduled to be released in April or May 2009. Please be aware that changes may be issued by the end of the year. EHS Support will continue to monitor the FASB communication and update you on any changes that will affect your business.
Questions about the current and proposed SFAS 5 regulations can be discussed with Andy Patz at 412-215-7703 or Andy.Patz@ehs-support.com.
Click here to read about changes made to SFAS141(R) in December 2008.