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August 8, 2008
U.S. Chamber Says Proposed Changes to FASB Standard will Benefit Plaintiffs' Lawyers, Not Investors
WASHINGTON, D.C.-The U.S. Chamber of Commerce today voiced strong opposition to proposed accounting rule changes that it says would open the door to lawsuit abuse by trial lawyers and would not provide clear or useful new information to investors.
"This proposed rule is nothing but a solution in search of a problem," said David T. Hirschman, president of the U.S. Chamber Center for Capital Markets Competitiveness. "The changes would invite excessive and abusive lawsuits against public companies and hurt U.S. global competitiveness."
In a letter to the Financial Accounting Standards Board (FASB), the Chamber outlined its objections to proposed amendments to Statement of Financial Accounting Standard No. 5 (FAS 5), "Accounting for Contingencies," which would significantly increase the amount of information publicly traded companies are required to disclose regarding pending or threatened litigation. According to the Chamber, these additional requirements would force companies to release immaterial or confidential information-likely resulting in excessive or harassing lawsuits filed by plaintiffs' trial attorneys.
"If there's one thing we don't need more of, it's abusive lawsuits," said Lisa A Rickard, president of the U.S. Chamber Institute for Legal Reform (ILR). "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."
Under the current standard, companies are required to disclose loss contingencies for "probable losses." 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 added that 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.
ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the national, state, and local levels. The mission of the U.S. Chamber's Center for Capital Markets Competitiveness (CCMC) is to maintain and advance America's global leadership in capital formation by supporting capital markets that are the most fair, efficient, and innovative in the world. The U.S. Chamber of Commerce is the world's largest business federation, representing more than 3 million businesses and organizations of every size, sector, and region.
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