This blog has moved to:

« EU and IASB Ratchet Up Pressure on the U.S. to Abandon GAAP | Main | More Reasons to Excise Contingent Liabilities from Balance Sheets »

May 22, 2009



I'm not seeing the conceptual difference between Scenarios 1 and 4, except that in #1 the obligation is imposed by the government and #4 it is self-imposed.

Suppose they sell 1 million hamburgers a day. Statistically, they can estimate 365 claims (let's assume for argument they will all be successful). Whether government-imposed or self-imposed, is there a present obligation?

Given that there are few cases as clear-cut as the IASB's example, might a better solution be for a company to disclose the dollar amount under dispute from current litigation against the company, and the value of outstanding judgments?
This is likely to start another fight between the AICPA/PCAOB and ABA over attorney letters, though it is probably inevitable since the 1975 compromise is increasingly untenable.


Excellent post, Tom, as usual. The way I am looking at this is that this is another earning management tool, sort of speak. Determining the present obligation (or quantifying it as FASB would like to call it)requires "lots of judment," and I think this is the direction FASB is headed at.

Wilson Kazuyoshi Sato

A Brazilian lawyer needs help!!! Please, where I can find a FASB definition for "liability"? I´m working on this issue and disagree with the IASB definition, considering our brazilian legal definition for liability. Sorry for my bad English.

Wilson Kazuyoshi Sato

Hello! I´m here again. Now I need some help regarding the original version of IAS 37. I would like to know what sayed # 1.c and 4, which were deleted. Thanks a lot.

The comments to this entry are closed.

This blog has moved to: