FASB has updated its website this afternoon with comments submitted on its proposal to require more reporting on contingent liabilities resulting from litigation. (See earlier post, directly below.) We're up to 217 responses, and comments continue to be overwhelmingly critical.
And just to be clear about it, no matter how much the proposal is criticized by businesses -- who represent most of the comments -- we're not suggesting anything malign about FASB's proposal. The board's goal is improved transparency for investors and the public, which is a good thing, generally. The trouble is that the proposal could lead to misleading information and damaging, simply wrong statements being made public, while at the same time the attorney-client privilege is undermined. You could see how the pro-litigation crowd might take advantage of the the mixture of confusion and revealed strategies, but investors certainly aren't served by even more lawsuits.
BTW, we see that the Teamsters can be counted as members of the "pro-litigation crowd." James P. Hoffa's letter says FASB hasn't gone far enough in asking for disclosure of potential liabilities resulting from litigation.
Elsewhere, the WSJ Law Blog has a post on the drug companies' submission, using the Vioxx litigation as an example of circuitous litigation with hard-to-forecast contingencies. (We noted the blog comments at Shopfloor.org.)
The Washington Legal Foundation also submitted a letter that warrants notice. Excerpt:
The FASB has stated that investors and other users of financial statements have expressed concerns that the present rule is inadequate to aid financial statement users in assessing the likelihood, timing, and amount of future cash flows associated with loss contingencies. Exposure Draft, Summary. However, WLF does not believe that FASB has made a compelling case that the current standard, which has been in place for over 30 years, does not provide adequate information to investors. In that regard, we agree with the comments filed by Allergan on July 16, 2008, that only a few vocal proponents, unrepresentative of the investor community, are advocating this change and that the FASB should fully disclose to the public the empirical information it possessed that prompted these proposed changes.
Yes, indeed. Transparency.
UPDATE: More on the drug company submission at Pharmalot.