Jeff,

Sorry, I didn't realize we were attacking this one early over the holiday, 
and I was out of town
until this afternoon. My conclusions differed from the attached write up on a 
few points, but I am
not certain my thinking is the correct way. Here goes:

On the expropriation:

In the write up we say "We agree with the executive that Global should report 
the expropriation
contingency in its 1994 report since both conditions included in FASB #5 were 
met:  1) sufficient
information to assess that a loss is probable and 2) the loss could be 
reasonably estimated.
Matuto took power in 1994 and it was known that he would nationalize major 
industries.  "

The book says "The imminence of an expropriation may be indicated by a public 
or private
declaration of intent by a government to expropriate assess of the enterprise 
or actual
expropriation of assets of other enterpises." I would argue that Matuto was 
not the government and
therefore unable to enforce these assertions when he was running for office. 
It also says FASB 5
requires the two accrual criteria to be met.

As I understand it, the government took over sometime last year and 
nationalization of resources
was part of their platform. However, the announcement occured in mid-Feb 1995 
that the government
intends to nationalize the mining industry. Also, the taking over of the 
telephone company took
place in January. Since both of these events happened in 1995, I would think 
they should not accrue
in 1994 because the asset was not actually impaired in 1994, in fact the 
asset was fully functional
and operational for the entire financial reporting period. I believe they 
should disclose that the
possibility of expropriation exists in 1994, but I think they should not 
accrue..

I disagree that the company should cease use of the patent infringing 
technology, I believe that
companies frequently make conscious business decisions to infringe upon 
patents. Since I agree that
an accrual is not in order, perhaps a general disclosure regarding patent 
litigation should be
made.

The book states that "If there are several aspects of litigation, each of 
which gives rise to a
possible claim, then the accrual criteria should be applied to each possible 
claim...."

Thus I think we should break up the product liability suit into pieces. 
They've agreed to pay 1M
for lost rentals. This should clearly be accrued, assuming it hasn't been 
paid yet. The tenants
claims are expected to be settled for 1M, this too should be accrued. The 
surrounding property
claims are not estimable, and therefore should be handled with a disclosure.

Christine

Jeff.Dasovich@enron.com wrote:

> OK folks, here it is.  Sorry for the delay, but those pesky questions ended
> up being more detailed than I anticipated.  Please take a quick look and
> let me know if there are any comments---more ambiguities than usual in this
> one.  I'll await comments and finalize this evening.
>
> Jimmie/Dylan--my apologies, but last Wednesday evening, I found out that I
> have to be in LA for a meeting tomorrow.  If I make it to class at all
> tomorrow, I won't get there until after the break.  Could one of you print
> out the case and bring it to class?  If not, don' t sweat it, I'll email
> him an electronic and turn in a hard copy to him on Tuesday. Sorry for any
> hassle.
>
> Best,
> Jeff
>
> (See attached file: Case 26-1 Global Industries.doc)
>
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>                                              Name: Case 26-1 Global 
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>    Case 26-1 Global Industries.doc           Type: Microsoft Word Document 
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>                                          Encoding: base64
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 - christine.piesco.vcf