By Cydney Posner

Corporate Counsel reports that the FASB Advisory Council has issued some slides that reflect FASB's latest thinking on the "alternative model" for disclosure of loss contingencies under FAS 5. The slides represent only a "collection of ideas" that the staff would like to field test, but, depending upon how well they are received, some of the ideas may be reflected in the final statement. Generally, the alternative model would focus on qualitative and quantitative information, requiring disclosure about the likely outcome, factors affecting the outcome and assumptions only if not prejudicial to disclose. Quantitative disclosure should give readers a sense of the potential magnitude of the loss contingency. Some examples provided are:

  • "Although the complaint does not specify the amount of damages sought, we have received a report prepared by the plaintiff's expert setting forth damages of $100 million."
  • "in the event of a ruling against the entity, we will be subject to fines and penalties of up to $20 million."

Other disclosures would include assertions made against the entity and the entity's response, qualitative description of the potential effect of a negative outcome on operations and liquidity, information about a large number of similar claims and information about the class period for a securities class action.

Field testing is expected to be completed by the first week in January, to be followed by public roundtable discussions and FASB deliberations.

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