Resolving Complex Financial and Accounting Issues in International Disputes
Resolving Complex Financial and Accounting Issues in International Disputes
Contents
- Presentation to The Chicago International Dispute Resolution Association February 20, 2004
- Topics for Discussion
- Topics for Discussion, continued
- Introduction to FTI
- FTI Serves You Throughout The Dispute Lifecycle
- Overview of FTI's Forensic & Litigation Consulting Structure
- FTI's Approach to International Arbitration Disputes
- FTI's Approach to International Arbitration Disputes
- Joint Venture, Partnership and Other Contractual-Related Disputes
- Post-Acquisition Disputes
- Construction Claims
- Business Interruption Claims
- Intellectual Property Claims
- Case Example #1: International Arbitration
- Case Example #2: Neutral Accountant in International Arbitration - French Pension Plan Liability
- Case Example #3: Consulting Expert in Arbitration - Post-Acquisition Dispute
- Potential Incremental Recovery from Arbitration [$USD]
- Case Example #4: Testifying Expert Witness in Arbitration - Breach of Contract Claim
- Unit Production
- Overview of Use of Technology Communications, Visual Media, and Discovery Consulting Services
- Recap of Topics Discussed
- FTI Consulting contact information
FTI Presentation - Slide 2
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Introduction to FTI
FTI Forensic & Litigation Consulting Structure
FTI's Approach to an International Arbitration Dispute:
Joint venture, partnership, and other contractual disputes
Post-acquisition disputes
Construction claims
Intellectual property
Business interruption claims
FTI Presentation - Slide 3
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Selected Case Examples
Overview of Use of Technology in International Disputes
Recap of Topics Discussed
Supplemental Information (in brochure packets):
FTI's Chicago international arbitration team representatives
FTI's CIS-related international dispute experience
Selected articles
"Assessing The Incremental Recovery In Arbitration Of Post-merger & Acquisition Accounting And Valuation Disputes: A Case Example" by John Levitske and Jeff Litvak (FTI-Chicago)
"Arbitrating International Oil & Gas Disputes Involving CIS Parties" by Dean Graves (FTI-Houston)
FTI Presentation - Slide 4
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Premier provider of corporate finance / restructuring,
forensic accounting, economic consulting, and
trial services.
FTI Presentation - Slide 5
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
FTI Presentation - Slide 6
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
FTI's Forensic & Litigation Consulting Practice is in the Business of Dealing with Issues where Facts, People and Organizations Do Not Agree, or where Financial or Other Business Related Behavior May Not Comply with Expectations.
Dispute consulting
Financial investigations & forensic accounting
Technology consulting
Specialized services
FTI Presentation - Slide 7
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Approach to the Resolution of Cross-Border and Multi-Jurisdictional Disputes:
International alliance for collaboration with foreign counterparts, as needed
Obtain an understanding of the local laws regarding CPA licensing, the type of testimony to be given, and discovery issues
Understanding of the applicable foreign accounting rules and regulations, and pertinent tax filings
Analyzing the type of publicly available information
Providing insight into the jurisdiction country's culture
Use of technology and communication tools to facilitate process
FTI Presentation - Slide 8
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Focused International Arbitration Team Specializing in:
Joint venture, partnership and other contractual disputes
Post-acquisition disputes
Construction claims
Business interruption claims
Intellectual property claims
FTI Presentation - Slide 9
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Joint Venture and Partnership Accounting Issues
Generally Accepted Accounting Principles/Practice with Specialists in Multi-Jurisdictions
Economic Interpretation of the Contract
Calculation of the Present Value of the Contract based on the Assessment of the Contractual Revenue and Cost Issues
Piercing the “Corporate Veil” Issues; Analysis and Fact-Finding Pertaining to Alter-Ego, Lack of Corporate Separateness, Unity of Interest, or Voluntary Undertaking
FTI Presentation - Slide 10
Resolving Complex Financial and Accounting Issues in International Disputes
FTI's Approach to International Arbitration Disputes
Assessment of Working Capital/Closing Balance Sheet Claims:
Interpretation of multi-jurisdictional Generally Accepted Accounting Principles ("GAAP"), consistently applied issues
Worldwide resources available to access these issues
Assessment of Damage Issues:
Application of cash flow projections and market comparables to relevant damage theories
Dollar-for-dollar damages
Benefit-of-the-bargain damages
FTI Presentation - Slide 11
Resolving Complex Financial and Accounting Issues in International Disputes
Construction Claims
Large Construction Projects
Specialists Worldwide Include Engineers, Statisticians and Accountants
Assessment of Liability Issue Associated with the Contract
Assessment af Damages Issues Associated with the Contract:
Cost over-runs
Lost profits
FTI Presentation - Slide 12
Resolving Complex Financial and Accounting Issues in International Disputes
Business Interruption Claims
Assessment of Economic Aspects of the Contract
Analysis of Business Interruption Issues:
Length of interruption
Market analysis
Cash flow projections
Preparation of the business interruption claim
FTI Presentation - Slide 13
Resolving Complex Financial and Accounting Issues in International Disputes
Intellectual Property Claims
Determination of a “Reasonable Royalty”:
Assessment of the “hypothetical negotiation”
Market analysis
Return of existing licensing production
Royalty base analysis
Royalty rate analysis
Determination of Lost Profits:
“But for” sales analysis
Market share analysis
Incremental cost analysis
FTI Presentation - Slide 14
Resolving Complex Financial and Accounting Issues in International Disputes
Case Example #1: International Arbitration
ICC Arbitration Held in New York:
International dispute between large French defense contractor and manufacturer of in-flight entertainment systems for narrow body aircraft
Defendant defrauded contractor out of rights to the worldwide in-flight entertainment systems market for narrow body aircraft
Duration of dispute - one year
Valued in-flight entertainment market for narrow body aircraft - $30 M
Arbitrators' verdict - $30 M
FTI Presentation - Slide 15
Resolving Complex Financial and Accounting Issues in International Disputes
Case Example #2: Neutral Accountant in International Arbitration - French Pension Plan Liability
Post M&A Dispute Surrounding a Retirement Plan Liability for a French Production Facility Recorded on the Closing Balance Sheet:
Discrepancies between Asset Purchase Agreement and French union contracts
Comparison of the assumptions used by each parties' actuary
Does a change in an actuarial assumption (i.e., longevity / number of employees / etc.) represent GAAP inconsistently applied or simply a correction of an error? Does GAAP incorrectly applied consistently trump a correction of an error under GAAP?
Provided Final and Binding Award after Determining Appropriate Inputs in the Actuarial Model:
Determined that a correction of an error does not equate to GAAP inconsistently applied
FTI Presentation - Slide 16
Resolving Complex Financial and Accounting Issues in International Disputes
Case Example #3: Consulting Expert in Arbitration - Post-Acquisition Dispute
US Manufacturer v. US Manufacturer
Seller Claims $10 Million in Post-Closing Adjustments for Acquired UK Company
Provided Early Dispute Resolution Services to Seller Regarding:
Comparison of UK GAAP v. US GAAP
GAAP consistently applied per the SPA
Netting and possible offsets within baskets and thresholds
Effects on closing and reference balance sheets
Probability assessment matrix of strengths and weaknesses of the parties' asserted claims
Case Settled after Initial Submissions to CPA-Arbitrator
FTI Presentation - Slide 17
Resolving Complex Financial and Accounting Issues in International Disputes
Potential Incremental Recovery from Arbitration [$USD]
FTI Presentation - Slide 18
Resolving Complex Financial and Accounting Issues in International Disputes
Case Example #4: Testifying Expert Witness in Arbitration - Breach of Contract Claim
Canada Manufacturer v. US Energy Company
Canada Manufacturer Claims $5 Million in Damages from Alleged Wrongful Termination of Joint Venture
Provided Expert Testimony on Behalf of US Energy Company Regarding:
Profitability of joint venture
Value of net assets of joint venture
CPA-Arbitrator Concurs with Our Findings Based upon the Contract
FTI Presentation - Slide 19
Resolving Complex Financial and Accounting Issues in International Disputes
Unit Production
FTI Presentation - Slide 20
Resolving Complex Financial and Accounting Issues in International Disputes
Overview of Use of Technology
Communications, Visual Media, and
Discovery Consulting Services
TrialMAX
Case example: International Arbitration
Communications and Visual Media
Discovery Consulting Services:
Electronic discovery strategy
Evidence preservation and analysis
Demonstration of Ringtail Web Hosting
Web-based knowledge management tool for collaborating, managing and developing case themes:
Coordinate complex/multi district litigation
Immediate access to all case materials
Analysis through auditing and reporting tools
Secure and accessible from virtually any location
FTI Presentation - Slide 21
Resolving Complex Financial and Accounting Issues in International Disputes
Recap of Topics Discussed
Approach to the Resolution of Cross-Border and Multi-Jurisdictional Disputes:
International alliance for collaboration with foreign counterparts, as needed
Obtain an understanding of the local laws regarding CPA licensing, the type of testimony to be given, and discovery issues
Understanding of the applicable foreign accounting rules and regulations, and pertinent tax filings
Analyzing the type of publicly available information
Providing insight into the jurisdiction country's culture
Use of technology and communication tools to facilitate process
Focused International Arbitration Team Specializing in:
Joint venture, partnership and other contractual disputes
Post-acquisition disputes
Construction claims
Business interruption claims
Intellectual property claims
FTI Presentation - Slide 22
Resolving Complex Financial and Accounting Issues in International Disputes
Thank You for the Opportunity to Meet with You
FTI Consulting, Inc.
333 West Wacker Drive
Suite 600
Chicago, IL 60606
Contact:
John Levitske
312.252.9318