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Thanks. I'll soften the expropriation language. I don't think they can
disclose the $1 million on the product liability case, since the entire package appears to be one negotation, all the pieces of which likely have to be agreed to, or no settlement. But you're point's well taken and I'll try to acount for it in the answer. Finally, I can't see disclosing the fact that I'm infringing on someone's patent in my annual report. Seems like I'd have a hard time defending myself in court if they sued me, if I'd admitted it to it in my annual report. If I don't see you tomorrow, have a good week. Christine Piesco <christine.piesco@oracle.com< 11/26/2000 05:10 PM To: Jeff.Dasovich@enron.com cc: Subject: Re: Global Case Jeff, Sorry, I didn't realize we were attacking this one early over the holiday, and I was out of town until this afternoon. My conclusions differed from the attached write up on a few points, but I am not certain my thinking is the correct way. Here goes: On the expropriation: In the write up we say "We agree with the executive that Global should report the expropriation contingency in its 1994 report since both conditions included in FASB #5 were met: 1) sufficient information to assess that a loss is probable and 2) the loss could be reasonably estimated. Matuto took power in 1994 and it was known that he would nationalize major industries. " The book says "The imminence of an expropriation may be indicated by a public or private declaration of intent by a government to expropriate assess of the enterprise or actual expropriation of assets of other enterpises." I would argue that Matuto was not the government and therefore unable to enforce these assertions when he was running for office. It also says FASB 5 requires the two accrual criteria to be met. As I understand it, the government took over sometime last year and nationalization of resources was part of their platform. However, the announcement occured in mid-Feb 1995 that the government intends to nationalize the mining industry. Also, the taking over of the telephone company took place in January. Since both of these events happened in 1995, I would think they should not accrue in 1994 because the asset was not actually impaired in 1994, in fact the asset was fully functional and operational for the entire financial reporting period. I believe they should disclose that the possibility of expropriation exists in 1994, but I think they should not accrue.. I disagree that the company should cease use of the patent infringing technology, I believe that companies frequently make conscious business decisions to infringe upon patents. Since I agree that an accrual is not in order, perhaps a general disclosure regarding patent litigation should be made. The book states that "If there are several aspects of litigation, each of which gives rise to a possible claim, then the accrual criteria should be applied to each possible claim...." Thus I think we should break up the product liability suit into pieces. They've agreed to pay 1M for lost rentals. This should clearly be accrued, assuming it hasn't been paid yet. The tenants claims are expected to be settled for 1M, this too should be accrued. The surrounding property claims are not estimable, and therefore should be handled with a disclosure. Christine Jeff.Dasovich@enron.com wrote: < OK folks, here it is. Sorry for the delay, but those pesky questions ended < up being more detailed than I anticipated. Please take a quick look and < let me know if there are any comments---more ambiguities than usual in this < one. I'll await comments and finalize this evening. < < Jimmie/Dylan--my apologies, but last Wednesday evening, I found out that I < have to be in LA for a meeting tomorrow. If I make it to class at all < tomorrow, I won't get there until after the break. Could one of you print < out the case and bring it to class? If not, don' t sweat it, I'll email < him an electronic and turn in a hard copy to him on Tuesday. Sorry for any < hassle. < < Best, < Jeff < < (See attached file: Case 26-1 Global Industries.doc) < < ------------------------------------------------------------------------ < Name: Case 26-1 Global Industries.doc < Case 26-1 Global Industries.doc Type: Microsoft Word Document (application/msword) < Encoding: base64 < Download Status: Not downloaded with message - christine.piesco.vcf
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