MD&A Case Addresses Whether An Uncertainty Is "Known"

A recent district court decision suggests that disclosure about an uncertainty under Item 303 of Regulation S-K may not be required when a company concludes that assertion of a claim relating to the uncertainty is not considered to be probable. In In re SAIC, Inc. Securities Litigation, the U.S. District Court for the Southern District of New York dismissed the complaint upon reconsideration of its earlier denial of a motion to dismiss because the court admitted that its prior analysis of the accounting literature was flawed. Topic 450-20-50-6 of the FASB Accounting Standards Codification requires disclosure about an unasserted claim only if assertion of the claim is probable and there is a reasonable possibility that the outcome will be unfavorable. Given the absence of evidence in SAIC that the assertion of a claim was probable, the court held that the allegations did not support a finding that the financial statements did not comply with GAAP. The court then