This article is the second in a four-part series written to address the dilemmas that litigation and bankruptcy practitioners face regarding a company’s contingency claims.
The American Bar Association and many other associations, organizations, and companies have submitted comment letters to the Financial Accounting Standards Board (FASB) in an effort to modify, delay, or altogether kill proposed changes to accounting rules for the accounting of contingency claims. These proposed changes are detailed in a July 20, 2010, FASB Exposure Draft called Contingencies (Topic 450), Disclosure of Certain Loss Contingencies. The proposed rules could have a dramatic effect on all companies but would especially affect companies in litigation or bankruptcy. The proposed rule changes were to go into effect for companies with fiscal years ending after December, 15, 2010. However, against a backdrop of opposition and dissent, the FASB has indefinitely delayed any implementation of proposed changes. It remains uncertain whether there will eventually be another revised Exposure Draft or the current standard will remain unchanged.