# ASC 450-20-S99: Contingencies — Loss Contingencies — SEC 99 SEC Materials Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/450/20/#sec-99-sec-materials) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:27:44.704Z to 2026-09-10T00:27:44.704Z Record version: sha256:d2e3dad00128db63457a0fdc7ef3f8378d788f34d799ca1eedbedf394f38efb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 450-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/450/20/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [450-20-S99-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:44.704Z to 2026-09-10T00:27:44.704Z Record version: sha256:2bb745ab26585518edf7768d542cef8a86f02719faae7d0030315d117d9948ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.Y, Accounting and Disclosures Relating to Loss Contingencies. - Facts: A registrant believes it may be obligated to pay material amounts as a result of product or environmental remediation liability. These amounts may relate to, for example, damages attributed to the registrant's products or processes, clean-up of hazardous wastes, reclamation costs, fines, and litigation costs. The registrant may seek to recover a portion or all of these amounts by filing a claim against an insurance carrier or other third parties. - Question 1: Assuming that the registrant's estimate of an environmental remediation or product liability meets the conditions set forth in FASB ASC paragraph [410-30-35-12](https://asc.understandingaccounting.org/asc/410/30/#410-30-35-12) (Asset Retirement and Environmental Obligations Topic) for recognition on a discounted basis, what discount rate should be applied and what, if any, special disclosures are required in the notes to the financial statements? - Interpretive Response: The rate used to discount the cash payments should be the rate that will produce an amount at which the environmental or product liability could be settled in an arm's-length transaction with a third party. Further, the discount rate used to discount the cash payments should not exceed the interest rate on monetary assets that are essentially risk free FN48 and have maturities comparable to that of the environmental or product liability. - FN48 As described in Concepts Statement 7, _Using Cash Flow Information and Present Value in Accounting Measurements_. - If the liability is recognized on a discounted basis to reflect the time value of money, the notes to the financial statements should, at a minimum, include disclosures of the discount rate used, the expected aggregate undiscounted amount, expected payments for each of the five succeeding years and the aggregate amount thereafter, and a reconciliation of the expected aggregate undiscounted amount to amounts recognized in the statements of financial position. Material changes in the expected aggregate amount since the prior balance sheet date, other than those resulting from pay-down of the obligation, should be explained. - Question 2: What financial statement disclosures should be furnished with respect to recorded and unrecorded product or environmental remediation liabilities? - Interpretive Response: FASB ASC Section 450-20-50, Contingencies—Loss Contingencies—Disclosure, identifies disclosures regarding loss contingencies that generally are furnished in notes to financial statements. FASB ASC Section 410-30-50, Asset Retirement and Environmental Obligations—Environmental Obligations—Disclosure, identifies disclosures that are required and recommended regarding both recorded and unrecorded environmental remediation liabilities. The staff believes that product and environmental remediation liabilities typically are of such significance that detailed disclosures regarding the judgments and assumptions underlying the recognition and measurement of the liabilities are necessary to prevent the financial statements from being misleading and to inform readers fully regarding the range of reasonably possible outcomes that could have a material effect on the registrant's financial condition, results of operations, or liquidity. In addition to the disclosures required by FASB ASC Section 450-20-50 and FASB ASC Section 410-30-50, examples of disclosures that may be necessary include: - Circumstances affecting the reliability and precision of loss estimates. - The extent to which unasserted claims are reflected in any accrual or may affect the magnitude of the contingency. - Uncertainties with respect to joint and several liability that may affect the magnitude of the contingency, including disclosure of the aggregate expected cost to remediate particular sites that are individually material if the likelihood of contribution by the other significant parties has not been established. - Disclosure of the nature and terms of cost-sharing arrangements with other potentially responsible parties. - The extent to which disclosed but unrecognized contingent losses are expected to be recoverable through insurance, indemnification arrangements, or other sources, with disclosure of any material limitations of that recovery. - Uncertainties regarding the legal sufficiency of insurance claims or solvency of insurance carriers. FN49 - FN49 The staff believes there is a rebuttable presumption that no asset should be recognized for a claim for recovery from a party that is asserting that it is not liable to indemnify the registrant. Registrants that overcome that presumption should disclose the amount of recorded recoveries that are being contested and discuss the reasons for concluding that the amounts are probable of recovery. - The time frame over which the accrued or presently unrecognized amounts may be paid out. - Material components of the accruals and significant assumptions underlying estimates. - Registrants are cautioned that a statement that the contingency is not expected to be material does not satisfy the requirements of FASB ASC Topic 450 if there is at least a reasonable possibility that a loss exceeding amounts already recognized may have been incurred and the amount of that additional loss would be material to a decision to buy or sell the registrant's securities. In that case, the registrant must either (a) disclose the estimated additional loss, or range of loss, that is reasonably possible, or (b) state that such an estimate cannot be made. - Question 4: What disclosures should be furnished with respect to site restoration costs or other environmental remediation costs? FN52 - FN52 Registrants are reminded that FASB ASC Subtopic 410-20, Asset Retirement and Environmental Obligations—Asset Retirement Obligations, provides guidance for accounting and reporting for costs associated with asset retirement obligations. - Interpretive Response: The staff believes that material liabilities for site restoration, post-closure, and monitoring commitments, or other exit costs that may occur on the sale, disposal, or abandonment of a property as a result of unanticipated contamination of the asset should be disclosed in the notes to the financial statements. Appropriate disclosures generally would include the nature of the costs involved, the total anticipated cost, the total costs accrued to date, the balance sheet classification of accrued amounts, and the range or amount of reasonably possible additional losses. If an asset held for sale or development will require remediation to be performed by the registrant prior to development, sale, or as a condition of sale, a note to the financial statements should describe how the necessary expenditures are considered in the assessment of the asset's value and the possible need to reflect an impairment loss. Additionally, if the registrant may be liable for remediation of environmental damage relating to assets or businesses previously disposed, disclosure should be made in the financial statements unless the likelihood of a material unfavorable outcome of that contingency is remote. FN53 The registrant's accounting policy with respect to such costs should be disclosed in accordance with FASB ASC Topic 235, Notes to Financial Statements. - FN53 If the company has a guarantee as defined by FASB ASC Topic 460, Guarantees, the entity is required to provide the disclosures and recognize the fair value of the guarantee in the company's financial statements even if the "contingent" aspect of the guarantee is deemed to be remote. ##### [450-20-S99-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-S99-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:44.704Z to 2026-09-10T00:27:44.704Z Record version: sha256:251386d14a4a77719f129c8641646fe36bea4dc75866b8e30767e2e5d4d5adc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Staff Announcement: Accounting for Legal Costs Expected to Be Incurred in Connection with a Loss Contingency. - Dates Discussed: January 23, 1997; March 24-25, 1999 - The Task Force discussed a potential new issue relating to the accounting for legal costs expected to be incurred in connection with a FASB Statement No. 5, Accounting for Contingencies, loss contingency. Some Task Force members observed that they believe practice typically has expensed such costs as incurred; however, other Task Force members suggested that practice may not be consistent in this area. The Task Force declined to add this potential new issue to its agenda. - The SEC Observer noted that the SEC staff would expect a registrant's accounting policy to be applied consistently and that APB Opinion No. 22, Disclosure of Accounting Policies, requires disclosure of material accounting policies and the methods of applying those policies.