WorkflowCorporate Legal Department

Loss Contingency Assessment

Loss contingency assessment that reads each quarter’s filings, rulings and counsel letters, places each pending lawsuit on the accrue-or-disclose grid, and brings only the moves to a lawyer.

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Open the grid and follow each move to the footnote ↓

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The problem

Sixty-three lawsuits, nine outside firms and a footnote copied forward

Each quarter the deputy general counsel starts again from a spreadsheet of pending matters, emails to each outside firm, offers sitting in inboxes and last quarter’s footnote, then redlines it all again just ahead of the disclosure committee.

The movement hides in the reading: summary judgment denied, a damages expert excluded, a demand that arrives by email. Counsel’s words differ from firm to firm, and each has to land in the same tier quarter after quarter. Miss one and the accrual lands a quarter late, which has cost a company a restatement and its general counsel a personal judgment.

Then the same figures have to agree in the grid, the journal entry, the footnote, the legal proceedings item and the letters to the auditors.

Built forGeneral counselsLitigation counselChief accounting officersDisclosure committees

The Problem Today

Each quarter, lawyers rebuild the litigation reserve by hand, and a ruling that makes a loss probable is easy to miss.

$2M: penalty on a company that accrued a probable lawsuit loss late published
3 weeks: of litigation team time each quarter to rebuild it our estimate

Pieced together each quarter

Rulings
Letters
Reserves
Footnote

Counsel’s words varyLikely, or cannot predict, has to become a tier
One figure, five documentsGrid, ledger, footnote, filing and auditor letter

The Solution

Every filing and letter readRulings, counsel assessments and settlement offers, each cited
Each lawsuit on the gridProbable, reasonably possible or remote, and whether it can be estimated
Only the moves surfaceWhat changed since last quarter opens on the passage that moved it
Low end booked, note draftedWith no better figure in the range, the low end is accrued

Built-in controls

A lawyer confirms every move; agents propose
Insurance never netted against a loss
Privileged advice never quoted in a disclosure

What You Get

The audit committee sees the numbers the auditors will test, in the quarter the loss moved.

2 days: for the quarter’s assessment, down from about three weeks our estimate

The moves, not every matterOnly what changed since last quarter reaches a lawyer
A redlined, cited footnoteDrafted from the signed grid, with the legal proceedings item
Auditor letters checked firstEach counsel answer read against the grid before audit

From docket to footnote

The quarter’s loss contingency work, from the grid to the signed footnote

The quarter closes on these nine screens. Beside each: what it does, step by step, and the lawyer or accountant it serves.

01Loss contingency grid
A loss contingency grid where each cell says accrue, disclose or neither
How it works
- Probable, reasonably possible and remote down the side, estimable or not across the top
- All 63 pending matters as dots sized by exposure, with last quarter’s place faded
- Four matters accrued at $14.8M; nine disclosed at $3.2–29.0M
- Clicking a dot shows its range, its basis, its counsel and the cited page
Deputy general counselSees the whole docket in the shape the accounting rule asks for, where before it was sixty-three spreadsheet rows rebuilt from scratch.
02What moved since last quarter
Only the matters that changed tier since last quarter reach a lawyer
How it works
- Each of the 63 matters compared with where it sat at last quarter-end
- A from-and-to table by tier: 60 unchanged, 3 moved, 4 new and 2 closed
- Accrued litigation goes from $8.3M to $14.8M; the $6.5M rise is about $0.02 per diluted share
- Each move opens on the passage that moved it
General counselHears about a loss that turned probable in the quarter it turned, well before the auditors ask about it.
03A matter that moved
Each new ruling read, and the passage that moves the tier highlighted
How it works
- The quarter’s motions, orders, counsel letters and offers on one timeline per matter
- The order denying summary judgment opens at page 11 with its key passage marked
- An exhibit too faint to read is flagged for a clearer copy
- The proposal lists its reasons, each tied to a page
Deputy general counselStops hunting the docket for the one ruling that changes the reserve: it arrives already tied to its page and the tier it points to.
04Counsel’s assessment
Counsel’s probability words mapped to a tier, the same way each quarter
How it works
- Outside counsel’s assessment read for its probability words and its range
- Probable, likely and more likely than not map to probable; unable to predict means ask counsel
- A $14.0M settlement demand stays outside the estimate
- Insurance above a $5.0M retention is shown beside the loss and left unnetted
Litigation counselGets the same tier from the same words across nine outside firms, so one firm’s likely and another’s probable land in one cell.
05Ranges and best estimates
A range ladder that sets what is booked against what is disclosed
How it works
- The 13 accrued and reasonably possible matters on one scale, in millions of dollars
- A marker for the amount booked, a bar for the range disclosed
- With no better amount in $6.5–9.0M, the $6.5M low end is accrued
- A mediation what-if: settling at $7.3M adds $0.8M, and nothing is booked from it
Chief accounting officerGets a number to book and a range to defend, carrying the same figures the footnote will print.
06Confirming a move
Each move confirmed, edited or turned down by a lawyer, reason kept
How it works
- A patent case moves from remote to reasonably possible after a claim construction order
- Its high end is the plaintiff’s own expert: 2.1% royalty on $152M of sales, $3.19M
- Confirm it, change the range, or turn it down, each with a written reason
- The lawyer who confirms can neither sign nor book
Deputy general counselDecides three moves with the pages open beside each one and leaves the sixty unchanged matters alone.
07Redlined footnote
A loss contingency footnote redlined against last quarter, each figure cited
How it works
- The contingencies note and the legal proceedings item drafted from the confirmed grid
- Accrued $14.8M replaces $8.3M; the aggregate range falls from $38.0M to $32.3M
- Checks that the accrual agrees with the ledger and that no privileged assessment is quoted
- Sign-off runs from the drafter to the deputy, the accounting officer and the general counsel
Chief accounting officerSees one figure agree across the grid, the journal entry, the footnote and the proceedings item before any of them leaves legal.
08Auditor letters
Counsel’s audit response letters checked against the grid first
How it works
- Nine firms asked, eight answered and one due, each answer read against the grid
- One firm declines to estimate, so the company documents its own $0–3.2M range
- A $1.2M offer inside its $0.4–1.8M range is logged on the matter
- Letters stay privileged; auditors see only what the general counsel signs
General counselFinds any gap between what outside counsel told the auditors and what the company will disclose, before the auditors find it.
09Disclosure committee pack
A disclosure committee pack laid out from the signed grid
How it works
- Six pages: agenda, the moves, the grid, the accrual entry, the redline, then letters and certifications
- Each figure checked against the grid and the ledger as the pack is built
- Counsel’s privileged passages are referred to and left unquoted
- It goes to the committee only after the general counsel signs
General counselWalks into the disclosure committee with the moves, the entry and the redline in one pack, sent five days before the meeting.

Four places a litigation reserve quietly slips

Each one settled by a lawyer before the general counsel signs.

A demand is a position

Plaintiffs in the wage-and-hour class action demanded $14.0M. The demand stays out of the estimate, and the $6.5M low end of counsel’s range is what gets accrued.

Counsel who will not estimate

One firm’s audit response on the patent case declines to estimate. That is allowed, so the company’s own $0–3.2M range, from the plaintiff’s expert, is filed beside the letter.

An offer inside the range

A $1.2M offer to settle a logistics contract case surfaced in another firm’s letter. It sits inside the disclosed $0.4–1.8M range, so it is noted and nothing moves.

An exhibit nobody could read

A scanned payroll extract filed with the opposition brief was too faint to read. It is flagged on the matter’s timeline for a clearer copy.

Around the grid

More of the loss contingency file: filters, letters, trail and settings

The views the deputy opens between the moves, and the ones the general counsel signs from.

Grid filtered to the three matters that moved, arrows from last quarter’s faded positions, with the patent case card open beside it — **Only what moved**One filter keeps the three moved matters, each with an arrow from last quarter’s faded dot. Here the patent case, now disclosed at $0–3.2M.

Matter page for a distribution contract case moving from reasonably possible to remote, the order excluding the damages expert highlighted — **A move the other way**A distribution contract case drops to remote once the plaintiff’s damages expert is excluded. Confirming it takes its paragraph out of the footnote.

Draft letter from the general counsel to the auditors stating the accrual, the reasonably possible range and the three moves, waiting for her signature — **The general counsel’s letter**Drafted from the confirmed grid: the matters considered, $14.8M accrued, the aggregate range and what moved. None of counsel’s privileged assessments is attached.

Legal proceedings item in redline beside a completed sign-off chain and five passing checks on the draft — **The legal proceedings item**It points to the footnote, tests the damages threshold of $340 million and adds the labeling inquiry as a government proceeding. Every check on the draft passes.

Audit trail of the quarter with seven agent entries and three by people, beside a separation-of-duties table for propose, confirm, book and sign — **Who read, proposed and signed**Each agent’s read and proposal to the minute, then each person’s step, beside who may propose, confirm, book and sign. Nobody holds two.

Settings with the quarter calendar, thresholds for naming a matter, the mapping from counsel’s words to tiers, and the rules the agents follow — **Settings the department owns**The quarter calendar, the $5.0M line for naming a matter in the footnote, counsel’s words mapped to tiers and the rules the agents follow.

The wage-and-hour class action, from counsel’s range to the booked low end

The quarter’s one new accrual, figure by figure.

What	Figure
Hourly workers in the class	About 4,100
Low end, from comparable settlements	$6.5M, about $1,585 a worker
High end, from counsel’s damages model	$9.0M, about $2,195 a worker
Accrued, as no amount in the range is better	$6.5M
Disclosed as reasonably possible above it	$2.5M
Plaintiffs’ settlement demand	$14.0M, left out of the estimate
Employment practices cover	Above a $5.0M retention, shown apart
Effect on earnings	$6.5M before tax, about $0.02 per diluted share

Agents propose each tier; a lawyer confirms it and the general counsel signs

Four people hold four duties, and none of them holds two.

Setting a tierAgents propose probable, reasonably possible or remote. The deputy general counsel accepts, changes or turns down each move, with a reason.

Booking the accrualThe chief accounting officer books the entry and confirms the numbers, and cannot change a tier.

Signing the grid and the footnoteThe general counsel signs the grid, the footnote and the letter to the auditors after the deputy and the accounting officer are done.

Sending to the auditorsNo agent sends anything. The auditors and the committee receive only what the general counsel has signed.

The accrual questions a disclosure committee raises

What is loss contingency assessment?

Loss contingency assessment is the quarterly call on each pending lawsuit: whether a loss is probable, reasonably possible or remote, and whether it can be estimated. This solution reads the quarter’s filings, counsel letters and offers, proposes each tier and range with its pages cited, and drafts the footnote that the general counsel signs.

When is a litigation loss probable enough to accrue?

When a loss is probable and the amount can be reasonably estimated. If only a range can be estimated and no amount in it is better than another, the low end is accrued and the rest of the range is disclosed as reasonably possible.

How do companies disclose a reasonably possible loss from a lawsuit?

With an estimate of the loss or the range, or a statement that no estimate can be made and why. The grid drafts each matter’s range, and the footnote states the total above accruals.

What does in-house counsel provide for the litigation reserve each quarter?

The tier and range for each matter, with its basis. Here the deputy general counsel confirms each move the agents propose, the chief accounting officer books the accrual, and the general counsel signs the grid, the footnote and the letter to the auditors.

Does a settlement demand or an insurance policy change the estimate?

No. A demand is a negotiating position and stays out of the estimate. An expected insurance recovery is shown beside the loss and is not netted against it.

Corporate Legal Department

Put last quarter’s docket
on the accrue-or-disclose grid.

Start from a quarter your department has already closed: its grid, its moves and its footnote, drafted from your own filings and letters.

Book a walkthrough Browse solutions

Loss Contingency Assessment

Sixty-three lawsuits, nine outside firms and a footnote copied forward

The Problem Today

The Solution

What You Get

The quarter’s loss contingency work, from the grid to the signed footnote

A loss contingency grid where each cell says accrue, disclose or neither

Only the matters that changed tier since last quarter reach a lawyer

Each new ruling read, and the passage that moves the tier highlighted

Counsel’s probability words mapped to a tier, the same way each quarter

A range ladder that sets what is booked against what is disclosed

Each move confirmed, edited or turned down by a lawyer, reason kept

A loss contingency footnote redlined against last quarter, each figure cited

Counsel’s audit response letters checked against the grid first

A disclosure committee pack laid out from the signed grid