The Financial Accounting Standards Board has issued for public comment a revised proposal on how companies should tell investors about possible losses they may face in future periods.

The proposed Accounting Standards Update focuses on disclosures related to loss contingencies, or circumstances where companies know they have a problem on their hands, but can’t fully predict the final outcome, such as a lawsuit or an environmental issue.

The standard would require companies to disclose some quantitative and some qualitative information about contingencies that would explain at least the nature of the issue, the potential magnitude and the potential timing, if it can be determined. FASB acknowledges that in the early stages of an event, disclosures may be limited because information may be limited.

The new rule would not give companies a free pass, however, on disclosing even the most remote possibilities, such as frivolous lawsuits. The standard would expand the current thresholds companies must consider in determining whether they must disclose situations where the possibility for an actual loss is remote. FASB’s intention is to eliminate the surprises investors sometimes experience when the remote outcome in fact becomes reality.

Under the proposed rule, companies would be required to disclose more information about prospective losses related to contingencies, especially if such data is publicly available through other sources, such as damages sought in a lawsuit that’s already been filed with a court. Public companies would be required to provide tabular displays of recognized loss contingencies, which may be grouped by type or class where possible, as long as the grouping is explained.

The standard differs from one the FASB published in June 2008, which called on companies to use some conjecture and provide estimates of possible outcomes. Corporate counsel in particular buried FASB with objections that the proposed approach would force disclosure of privileged information, especially by giving legal adversaries access to information that would compromise the outcome of disputes. The current proposal steers clear of any requirement for companies to make any predictions or estimates about possible outcomes.

Despite FASB’s current intense focus on converging U.S. rules with international accounting rules, the current proposal on loss contingencies is separate from FASB’s convergence agenda. The disclosures required in FASB’s proposal would be similar but not identical to the current international standard, but the International Accounting Standards Board is working on its standard as well.

FASB it accepting comments on its revised proposal through Aug. 20 with plans to put the standard into effect for the 2011 calendar year.