loophole: Accounting for contingencies is covered by Statement of Financial Accounting Standards No. 5. Para 8 states the basic rules as to accruals for loss contingencies. IMO the probability standard is highly subjective, and I doubt that any changes will be made at this time. I'm sure ron could comment further.
Accrual of Loss Contingencies
8. An estimated loss from a loss contingency (as defined in paragraph 1) shall be accrued by a charge to income if both of the following conditions are met:
a. Information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.
b. The amount of loss can be reasonably estimated.
Paras 33-39 of Appendix A to the statement discuss accruals for litigation
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