The Financial Accounting Standards Board is taking another step back from a major project on its technical agenda, conceding it won’t wrap up a contentious change in accounting for contingencies in time for the 2010 reporting year.

Contingencies are business issues like lawsuits, environmental liabilities, or other events where a company might face a gain or a liability in the future but can’t pin a dollar figure to it on a given financial reporting date. Investors have complained to FASB that they too often face surprises when companies resolve actions and disclose adverse consequences with little or no forewarning.

FASB first proposed a significant change to long-standing accounting and disclosure rules with a 2008 proposal that would have required companies to make some estimates about possible financial consequences and disclose them in financial statements. The corporate counsel community in particular protested that such disclosures would compromise attorney-client privilege and prejudice the outcome of negotiations or legal proceedings.

FASB reworked the proposal to drop the call for dollar figure projections but still require more disclosure than companies currently provide. FASB said it focused its disclosure requirements on information that should be available via other public documentation, such as lawsuits that are already filed in a court and therefore are publicly accessible.

FASB initially provided for a 60-day comment period when it published the proposal in mid-July, but then extended the comment period an additional month, through Sept. 20, when companies said they needed more time. At a meeting this week, FASB said it needs more time to digest the feedback and deliberate further changes to the proposal. As a result, the new standard will not be complete in time to meet the original target effective date, which was for fiscal years ending after Dec. 15, 2010.

FASB did not project when it will conclude deliberations and implement the standard, saving that determination for a future board meeting. Less than a week prior, FASB took measures with the International Accounting Standards Board to slow progress on two standards that once held great prominence in the boards' plan to converge U.S. and international accounting rules. As a result, changes to financial statement presentation and financial instruments with characteristics of equity will take a back seat to other efforts around revenue recognition, leasing, and financial instruments more broadly.