The Securities and Exchange Commission is keeping up its laser focus on the accounting and disclosure of loss contingencies as it performs routine filing reviews, still probing for more information when companies disclose "reasonably possible losses" that exceed amounts they have already recognized.

Nili Shah, a deputy chief accountant at the SEC, told the Center for Audit Quality's SEC Regulations Committee that the staff is still requesting disclosures of estimates of additional losses or ranges of losses, or the basis for not providing estimates when companies say estimates are not material or not possible. The staff has beefed up its patrol on loss contingency disclosures hoping to improve compliance with Accounting Standards Codification Topic 450 Contingencies to satisfy investors who say they too often are blindsided by lawsuit settlements that were not foretold in earlier filings. The Financial Accounting Standards Board is keeping tabs on the SEC's efforts to determine whether the accounting rules need to be beefed up as well.

According to a CAQ summary of Shah's presentation, Shah said the staff isn't demanding an itemized list of outstanding issues, so they won't quibble over aggregate disclosures for all contingencies. That means companies can disclose a range of reasonably possible losses for contingencies where estimates are possible while indicating estimates are not possible for other contingencies, she said. The staff does not insist that companies disclose which contingencies can be estimated vs. which cannot, she said, but it may request information that can be submitted confidentially to understand management's reasoning.

Shah noted the staff may ask for disclosure of a company's accounting policy about legal costs if they are material. The review process also pays close attention to uncertainties regarding recoveries of loss contingencies, she said, such as through insurance claims. Companies are expected to disclose whether reasonably possible losses are disclosed gross or net of any recovery the company may anticipate collecting from a third party, like an insurer. Companies also should disclose the accounting policy for uncertain recoveries, she said.

Finally, Shah noted, if the staff wraps up its comments on a specific filing, it doesn't mean the filing is off limits for future review. If the staff notices new developments disclosed in future filings around previously disclosed contingencies, it may ask more questions about earlier filings, she said.