Probably one of the most sensitive disclosures a public company may be required to make is information related to "contingencies." Disclosure of pending lawsuits and government investigations is closely scrutinized by analysts, investors and the SEC. With respect to the latter group, we recently came across the below SEC staff comment, which is a stark reminder of the importance of fully considering the accounting literature when analyzing whether a litigation contingency is probable and reasonably estimable. The comment pointedly asks the company (Stericycle, Inc.) why it was unable to disclose an amount or range of reasonably possible loss under the accounting literature for a legal proceeding when the settlement agreement was entered into shortly after the filing of the 10-Q. The company's response is worth reading.
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