The Search for a Safe Harbor

The CPA Journal, July 1995 | Go to article overview

The Search for a Safe Harbor


Part of liability reform that preparers financial information and outside reviewers of that information, i.e., accountants and others, are seeking is a safe harbor from litigation for forward looking information. Such a safe harbor is being sought at the Federal level in two ways:

* By amendment to the Federal securities laws and

* By revision to the regulations promulgated by the SEC.

The AICPA has written to and appeared before the SEC seeking regulatory safe-harbor protection for information appearing in historical financial statements that is based upon or derived from forward-looking information. Examples might be estimates appearing or described in historic financial statements that are based upon future events. If a safe harbor were granted by the SEC, it might remove some of the concern expressed by some practitioners about the implementation of SOP 94-6, Disclosure of Certain Significant Risks and Uncertainties, recently issued by AcSEC and effective in 1995.

A safe-harbor provision is also included in both pieces of securities litigation j reform legislation previously or currently being considered b Congress.

In H.R. 1058, passed by the House of Representatives, a very broad safe harbor would be granted. The bill states that a person shall not be liable in a private action with respect to any forward-looking statement to the extent it contains a projection, estimate, or description of future events and it is clear to the recipient that the information is forward looking and therefore may not be realized. …

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