Response to FASB's retreat from fair value

How might companies respond to FASB’s recent retreat from fair value?

As noted in the previous post, FASB stepped back from its earlier requirement that loss contingency liabilities for acquired properties be measured at fair value. With its release of FAS 141R-1 [Text] on April 1, 2009, FASB requires measurement at fair value only “if [it] can be determined.”

Formerly, under FAS 141R, released in December 2007, companies were to measure and recognize loss contingency liabilities at fair value—period, no exceptions for uncertainty about costs.

There were complaints from companies, however, that it was too difficult to determine costs for litigation-related loss contingencies. This, in part, was why FASB retreated.

So, how might companies respond to FAS 141R-1 with respect to environmental loss contingencies for acquired properties?

Setting aside consideration of litigation-driven loss contingencies, companies may well have other environmental contingencies (e.g., cleanup-related) that are amenable to fair value determination—through expected present value methodology in which cost uncertainty is made part (as probability) of cost estimation.

Should companies be motivated to apply fair value measurement to environmental loss contingencies that have not been recognized that way before?