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The Association of Corporate Counsel (ACC) and more than 100 legal executives have urged the Financial Accounting Standards Board to revise and delay plans to stiffen requirements for disclosing lawsuits and other loss contingencies. The ACC fears “immense harm” to companies and in-house lawyers if they are required to disclose more information about pending cases, the organization wrote on Aug. 18 in a letter to the board. The requirement would hurt companies’ chances of winning favorable results in litigation and expose their lawyers to attorney-client privilege problems, it said. The board released its “Disclosure of Certain Loss Contingencies” plan on July 20. It would apply to public company reports for fiscal years ending after Dec. 15. This week, the board extended the original Aug. 20 comment deadline to Sept. 20. “Because of the significant problems that the proposal would cause for companies, their shareholders and financial statement users and the lack of any significant benefit, we urge the [board] to refrain from proceeding with the proposed amendments in their current form,” wrote Susan Hackett, senior vice president and general counsel at the ACC. The accounting board did “a little bit better” with the draft plan, its second in this area, but still is pushing changes that ACC members consider ill-conceived, Hackett said in a telephone interview. Hackett collected the 100 or so corporate signatories in about seven business days after sending an e-mail to perhaps 200 member companies, she said. The ACC has three general concerns, she said. The first is that in-house lawyers who comply could be considered to have waived the attorney-client privilege. Another involves the expense and difficulties associated with setting up a compliance process. Finally, the system isn’t broken and doesn’t need to be fixed. “Companies are really tuned in on this,” Hackett said. “This is an unusual response showing an incredibly strong resolve to comment on these rules.” Companies whose general counsel signed the letter include AT&T Inc., Coca-Cola Enterprises Inc., General Mills Inc., Johnson & Johnson and Sun Microsystems Inc. “No one suggested that the disclosure process for contingent liability is broken,” Hackett said. “There’s nothing that anybody [at the board] can articulate about who’s asking for this and what is the demonstrated need.” The board would have no comment, said director of communications Neal McGarity. ACC’s crusade echoes the 2008 battle against a similar accounting board proposal. The board tabled its plan that September after receiving 239 comment letters. Since issuing its revised plan last month, the board has logged 44 comment letters. Nineteen asked the board to extend the comment period and most of the rest opposed the changes. Other trade groups opposing plan include the Association for Financial Professionals and the U.S. Chamber of Commerce. The former wrote on Aug. 17 that the plan would be particularly risky for small and midsize public companies. “Such companies are exposed to even greater risk of compromising its position in litigation, especially in circumstances where there may only be one material case pending,” the organization wrote in a letter signed by June Johnson, who chairs the organization’s financial accounting and investor relations task force, and Joseph Meek, who chairs its government relations committee. An Aug. 11 letter signed by David Hirschmann, president of the chamber’s Center for Capital Markets Effectiveness, and Lisa Rickard, president of the chamber’s Institute for Legal Reform, strongly urged the accounting board to drop its proposal. “[W]e believe that the proposal will not advance the interests of investors; indeed, it will harm investors by making companies more vulnerable to litigation and draining resources away from productive purposes to fund the work necessary to meet these unjustified requirements,” the letter said. Sheri Qualters can be contacted at [email protected].

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