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 June.
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 litigation.
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.
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.