As of November 18, 2010, the Financial Accounting Standards Board (FASB) decided to delay when the proposed accounting standard update on loss contingencies would go into effect. FASB stated that the update would not be effective for the 2010 calendar year-end reporting period. The new guidelines were initially set to be effective for public companies with fiscal years ending after December 15, 2010. A new effective date will be decided at a future meeting, after the Board has substantially concluded on its redeliberations. This is expected in the second half of 2011.
The new standard is expected to enhance the disclosure requirements under Accounting Standard Topic 450. The proposed accounting standard update would require entities to disclose the qualitative and quantitative information about loss contingencies to enable financial statement users to understand the following:
- The nature of the loss contingencies;
- The potential magnitude of the loss contingencies; and
- The potential timing of the loss contingencies.
The disclosures would become more extensive in subsequent periods as additional information becomes available. The proposed update would require all public information and relevant non-privileged information to be disclosed in the financial statements.
When assessing the materiality of loss contingencies to determine whether disclosure is required, an entity may not consider the possibility of any insurance recoveries.
If you have any questions on any of these recent updates, please contact Rob Hazel, Audit Advisory Services Manager, at email@example.com.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.