Following unhappy feedback to its eleventh-hour plan to facilitate new disclosures about incurred loan losses, the Financial Accounting Standards Board has decided to step back and rethink its approach.

The planned staff position, FAS 107-a, Disclosures about Certain Financial Assets: An Amendment of FASB Statement No. 107, was affectionately dubbed the “Christmas gift,” said Chairman Robert Herz at a FASB open meeting, because it was issued on Dec. 24 just in time for the Christmas holiday. The guidance would have required entities to provide new disclosures about their losses to help investors see where losses emanate from problems with liquidity compared with other reasons.

It was a prospective solution discussed frequently at FASB and Securities and Exchange Commission roundtables to address how regulators and rule makers should respond to the current stalemate in credit markets. FASB collected nearly 70 comment letters on the proposal, most critical of the plan.

In a staff summary of the feedback, the staff observed most believed the proposal to be a hastily prepared, piecemeal requirement that would be better addressed in a more comprehensive project—addressing either accounting for financial instruments generally or even all disclosures related to loan losses. The board agreed to withdraw the Christmas proposal and begin work on a new one to amend Financial Accounting Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require interim and annual disclosures of fair-value measurements for all financial instruments already covered by that standard.

The Board also determined the new guidance will reiterate qualitative disclosure requirements already contained in FAS 107 and FAS 157 Fair Value Measurements. As for an effective date, the board conceded it’s too late to require disclosures for 2008 year-end financial statements, so it’s targeting the first quarter of 2009.

Banks largely called on FASB to provide some method by which they could help investors see how losses are impacted by liquidity, prompting FASB member Marc Siegel to note he was “mildly surprised” that preparers thought they couldn’t produce the required disclosures in such a short period of time. “The objective was to provide information to markets to allow a conversation to happen that I think needs to happen—that is that many believe there are elements in fair value today of illiquidity,” he said.

The board’s objective, said Siegel, was to enable the dialogue to move from a high-level, theoretical discussion into more detailed analysis. “They’re talking over each other and around each other,” he said. “What I thought we were trying to do was provide some level of tangible details to allow for a conversation to happen to each other about some of the numbers and what they might reflect.”