strong opposition to proposed US accounting rule changes it said
would open the door to lawsuit abuse by trial lawyers and would not
provide clear or useful new information to investors.
The comments were in response to a Financial Accounting
Standards Board (FASB) exposure draft on Financial Accounting
Standard No 5, Accounting for Contingencies, which was issued in
The chamber’s centre for capital markets competitiveness
president, David Hirschman, said the proposed rule was nothing but
a “solution in search of a problem”.
“The changes would invite excessive and abusive lawsuits against
public companies and hurt US global competitiveness,” he said.
The chamber claimed the amended standard would significantly
increase the amount of information publicly traded companies are
required to disclose regarding pending or threatened
These additional requirements would force companies to release
immaterial or confidential information likely resulting in
excessive or harassing lawsuits filed by plaintiffs’ trial
attorneys, the chamber said. When the draft was released in June,
the FASB said the changes were proposed because investors and other
users of financial information had expressed concerns about current
disclosures. It said FAS No 5 did not provide sufficient
information in a timely manner to assist users of financial
statements in assessing the likelihood, timing and amount of future
cash flows associated with loss contingencies.
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The proposed rule would substantially raise that standard, in
some cases requiring companies to disclose all contingencies
regardless of how “remote” the losses, the chamber said.
The chamber’s institute for legal reform president, Lisa
Rickard, said adopting these proposals would add uncertainty,
complexity, new liability and a great deal of cost while compelling
companies to provide potentially unreliable, immaterial and
privileged information about pending litigation.
“If there’s one thing we don’t need more of, it’s abusive
lawsuits,” she commented.
The chamber also suggested the proposed changes would lead to
the erosion of attorney-client and work-product privileges by
requiring companies to reveal analysis and strategy regarding
pending or potential future litigation.