Not only does a corporation need to come to the table ready to deal in data, they may need to do so after disclosing risk and likelihood of settlement amounts in their financial statements.
Comments may be sent by email to director@fasb.org, File Reference No. 1025-300. By today, 8/8/08.
The transparency would benefit shareholders in one way and at the same time, potentially impact shareholders with overly risk averse disclosures to avoid, non other than, shareholder’s suits.
I feel an endless loop coming on.
From the Wall Street Journal editorial page (subscription required)
Under the proposed change, a company facing a lawsuit would have to list on its financial statement its best-guess estimate of what that litigation could end up costing — not just in attorney fees, but in any potential payout. For a company in high-stakes litigation, that means showing its hand to plaintiffs’ attorneys, allowing them to gauge management’s upper estimate of what the case is worth.
The effect will be to force corporate defendants to fight lawsuits with one hand tied behind their backs — assuming the company can even figure the “fair value” of a lawsuit it has no idea if it will win or lose. Predicting the trajectory of complex, often multiyear litigation is inherently unscientific. As we saw with Merck and Vioxx, a company’s stock price can jump or fall depending on jury verdicts whose results are impossible to predict.
From Wilson, Sonsini:
The proposed amendments raise significant concerns, including potentially requiring disclosure of key elements of a company’s litigation strategy, the possible waiver of attorney-client privilege and attorney work-product protection, and that the increased disclosure may itself be the source of additional litigation. In addition, the new disclosures may embolden plaintiffs to continue what otherwise may be problematic litigation and also may increase amounts paid in settlement. Clients who would like to comment on the proposal should note that comments in writing are due on this proposed amendment by August 8, 2008….
Comments in writing are due on this proposed amendment by August 8, 2008, and FASB plans to host an open forum on the proposed amendments at which those who have submitted comments may testify. Comments may be sent by email to director@fasb.org, File Reference No. 1025-300.
Filed under Sound Evidence, Technology Counsel.
August 8th, 2008 at 3:40 pm
Please note, the File Reference No. for comments is 1600-100, note 1025-300. See http://www.fasb.org/draft/ed_contingencies.pdf