FASB Considers Expanding Contingency Disclosures

The Financial Accounting Standards Board has issued an exposure draft to expand disclosures on loss contingencies. The FASB has concluded that investors are concerned as to whether present SFAS 5 provides sufficient information to assess likelihood, timing and amount of loss contingencies such as lawsuits. Among proposed topics are: an increase in the quantity of contingencies requiring disclosure, require more specifics (unless such specifics would clearly put the company at a disadvantage in a dispute) about specific qualitative (descriptive) and
quantitative (numerical) information associated with the contingency and require a tabular reconciliation of contingencies.

As such, FASB probably has a good idea here, although specifics would matter. A related thought - how about more complete disclosure of GAIN contingencies, including reasonably possibly gains. Additionally, publicly-traded companies should be required to indicate the basis for any contingencies not disclosed on the basis of remote likelihood.