Full Fathom Five: FASB's Proposed Amendments to FAS 5 Could Sink Your Ship


The Financial Accounting Standards Board (“FASB”) issued a proposed amendment of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (“FAS 5”) in June of this year1. The proposed amendment would significantly expand the disclosure that companies would be required to make about loss contingencies in the notes to their financial statements. This expanded disclosure is likely to raise serious issues for companies discussing loss contingencies that relate to pending or threatened litigation. The FASB’s proposed amendment also includes amendments to accounting standards related to loss contingencies arising from business combinations and environmental claims2. The proposed amendments would take effect for fiscal years ending after December 15, 2008.

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