When should you disclose a contingent liability?
Abstract: For public companies, disclosure of contingent liabilities — such as those associated with pending litigation or governmental investigations — is a highly sensitive matter. Companies want to avoid alarming investors with losses that are unlikely to occur or disclosing their litigation strategies. The SEC has noted that many companies aren’t providing the required information related to reasonably possible losses. This article describes the reporting requirements, noting that even voluntary disclosure of remote contingencies may help protect companies against shareholder claims in the event a loss occurs.