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Wednesday, August 19, 2009

FASB Weighs Disclosures Fought by Citigroup, JPMorgan

*big surprise that banks and companies would oppose this kind of disclosure. It cuts into their top and bottom line growth. JPM argues that it would tip plaintiffs off to their litigation strategies. Yeah right, don't make me laugh. Uhhhh, I have to pay investors who I stole from $300m to settle a lawsuit. How come? Cause I was guilty. give me a break! FULL DISCLOSURE is what investors should expect! Told you nothing has changed. Big banks get to ruin us all and get the government to hold their hands as co-conspirators.

(Bloomberg) -- The U.S. accounting rulemaker is reviving discussion on a proposal to require more disclosure of potential losses from lawsuits after opposition from Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp.

The banks objected when the Financial Accounting Standards Board sought last year to expand reports on possible outcomes from pending or anticipated litigation. Staff is recommending that the board, meeting today at its Norwalk, Connecticut, headquarters, “re-deliberate all of the significant issues,” according to a document on FASB’s Web site.

FASB pushed the change because investors said disclosures under the existing rule failed to provide enough information to assess “the likelihood, timing and amount of future cash flows associated with loss contingencies,” according to the June 2008 proposal. FASB in September delayed the plan pending more study.

Companies would need to disclose the amount or an estimate of a claim, the maximum potential loss and likely insurance coverage along with details on a dispute’s origin, its status, expected timing of a resolution and most likely outcome. A table would be required to display potential losses from litigation.

The rulemaker’s plan was “well-intentioned but ill- advised,” said Ray Ball, an accounting professor at the University of Chicago and member of a group that advises FASB. Instead of forcing companies to estimate potential liability, FASB should continue the practice of requiring extensive disclosure in the footnotes of financial statements, he said.

Ball said he wasn’t speaking for the advisory panel or FASB. Neal McGarity, a FASB spokesman, declined to comment.

Banks Opposition

FASB’s proposal didn’t “acknowledge that the outcomes of many loss contingencies (e.g., litigation) cannot be reliably predicted even within a range of potential outcomes,” Bank of America’s corporate controller, John James, said in an August 2008 letter to the panel.

Requiring a defendant to estimate potential losses “may provide a plaintiff with information regarding that entity’s litigation theory or strategy, thereby prejudicing it in the litigation,” wrote JPMorgan’s corporate controller, Louis Rauchenberger.

“The proposal, as written, will be detrimental to companies with pending or potential litigation and will provide little incremental reliable information to investors,” Citigroup Deputy Controller Robert Traficanti wrote in August 2008. “We suggest that the FASB discontinue this project.”

Bank of America’s position hasn’t changed since James’s letter, spokesman Scott Silvestri said. JPMorgan spokesman Brian Marchiony and Citigroup spokesman Stephen Cohen declined to comment.

McDonald’s, Exxon Mobil

Companies including Wells Fargo & Co., McDonald’s Corp., Bristol-Myers Squibb Co., Exxon Mobil Corp. and Dell Inc. also wrote letters opposing the measure.

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