The NAM has submitted a letter and comments to the Financial Accounting Standards Board commenting on a Proposed Statement of Financial Accounting Standards, “Disclosure of Certain Loss Contingencies an amendment of FASB Statements No. 5 and 141(R).” (FASB News release and proposed statement.)
From the NAM’s submission:
NAM members support FASB’s efforts to improve financial reporting and facilitate the convergence of U.S. Generally Accepted Accounting Principles (USGAAP) and International Financing Reporting Standrads (IFRS). At the same time, we are extremely concerned that the proposed changes to Statement 5, if finalized, would have a negative impact on companies and would not improve the quality of financial reporting.)
Specifically, the NAM does not believe that FASB should proceed with its proposed disclosure standard relating to loss contingencies at this time. We believe the proposed standard would lead to less accurate and less useful information for investors, threatening the attorney-client privilege and the attorney work product doctrine, unnecessarily provide information to potential claimants, and force corporate defendants to disclose privileged information to plaintiffs thereby jeopardizing their ability to defend the litigation.
So who’s pushing for these changes? CFO.com summarizes the advocates this way in a good overview piece, “Contingent Liabilities Draft Stirs It Up“:
On one side, investors with a social-responsibility mandate think current accounting disclosure rules are too lax. They support the enhanced disclosure being floated in the Financial Accounting Standards Board’s exposure draft , but think more should be done to reveal potential risks associated with environmental or social-justice violations.
The Wall Street Journal editorialized today on the proposed amendment, “FASB’s Lawyer Bonanza,” citing a comment letter from senior litigators in 13 companies (including NAM members), noting that some lawsuits are filed merely for the purpose of publicity and then dropped. How does one measure that contingent cost?
While neither that letter nor the NAM’s is posted yet at the FASB comments section, there is already a good selection of well-considered critiques of the plan. Among them, we commend the comments from the Association of Corporate Counsels (here) and this one from Tom Duesterberg at the Manufacturers Alliance/MAPI.
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