Valley’s corporate counsels up in arms about proposed disclosure rules

General counsels of several Silicon Valley corporations are in the vanguard of critics railing against changes being proposed by the Financial Accounting Standards Board “”that would force public companies to disclose more about the risks of litigation,” judging by the sources in this story by Zusha Elinson of the San Francisco Recorder.

“Under the revised rules for FASB Statement No. 5,” Elinson writes, “the threshold for reporting the potential loss from a lawsuit would be lowered from ‘probable’ to anything but ‘remote.’ Public companies would also have to estimate just how much legal threats might cost and the likely outcome. They’d also have to disclose more details about the underlying litigation and the reasoning behind their predictions.”

“This is a solution in search of a problem,” said Daniel Cooperman, general counsel of Apple. “I just don’t understand what the problem is we’re trying to solve. I just don’t think any of the recent disasters have been based on misperceptions of litigation loss contingencies.”

The proposed change would certainly mean a lot of extra work for Cooperman and his staff at Apple, which might be forced to estimate possible charges in a score of litigation waiting to be resolved as of the end of its last fiscal year, according to the company’s annual filing.

Here’s the boilerplate caveat that Apple includes as to the risk posed by the ongoing litigation: “results of legal proceedings cannot be predicted with certainty. Should (Apple) fail to prevail in any of these legal matters or should several of these legal matters be resolved against (Apple) in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.”

Cooperman, along with Sun Micro’s head lawyer, Michael Dillon, are reported to be “throwing their weight behind” opposition to the proposed changes that’s being mustered by the Association of Corportate Counsel and the American Bar Association in advance of the closing of FASB’s comment period on the rules.

Also quoted in the article are Brian Cabrera, general counsel at Synopsys, and Wilson Sonsini lawyer Steven Schatz.

 

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