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A tsunami of negative feedback from legal executives and groups has prompted the Financial Accounting Standards Board (FASB) to again delay implementing rules requiring financial statement disclosures of lawsuits and other loss contingencies. The board, which sets U.S. accounting rules, decided on Oct. 27 to delay its “ Disclosure of Certain Loss Contingencies” rules. The rules would have applied to public company financial reports for fiscal years that ended after Dec. 15. The board has yet to determine a new effective date. The FASB delayed its first much-criticized loss contingency disclosure proposal in 2008. In an e-mailed statement, Financial Accounting Foundation spokeswoman Christine Klimek noted that the organization previously moved the comments deadline to Sept. 20 from Aug. 20. “As a result, the Board announced earlier this week that a final effective date would not be determined until the Board has had sufficient time to review and analyze all of the feedback received; therefore, no new guidance will be effective before 2011,” stated Klimek. The board received 347 comment letters about the proposal, including protest letters from the American Bar Association, the Association of Corporate Counsel (ACC) and the U.S. Chamber of Commerce. The groups, along with individual lawyers and corporate counsel, believe the proposed rules would erode attorney-client privilege, harming companies’ chances of winning litigation. The Chamber believes the proposed rules would be particularly harmful to small to midsize companies. The ACC ended up with more than 150 signatories by the time the FASB extended the comment deadline, said Susan Hackett, senior vice president and general counsel at the ACC. “We’re heartened by the fact that they want to spend some more time and they’re not going to jam through what we think is an in ill-considered proposal,” Hackett said. On the other hand, since the FASB hasn’t suggested that it is revising its position, the ACC will “remain steadfast in protesting what we think are very bad proposals,” she said. “We will be back as soon as they announce when the next discussion and comment period will be.” The FASB’s delay “is not unexpected, given the nature and extent of the comments they received,” said Stanley Keller, a business law partner at Boston’s Edwards Angell Palmer & Dodge, who helped draft the ABA’s comment letter. “FASB made significant progress in addressing a lot of concerns [about its] original proposal [with this new one], but there are still concerns that deserve careful attention,” Keller said. “There’s now enough time to do that.” The FASB tabled its first loss contingency reporting proposal in September 2008, following a similar outcry from legal groups and in-house counsel. The board received 239 comment letters about that proposal. Sheri Qualters can be contacted at [email protected].

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