03302017Headline:

Tampa, Florida

HomeFloridaTampa

Email Tom Young Tom Young on LinkedIn Tom Young on Twitter Tom Young on Facebook Tom Young on Avvo
Tom Young
Tom Young
Attorney • (813) 251-9706

BP Business Economic Loss Claim Appeal 2016-1724: Using Discrete Cash and Accrual P7Ls Does Not Violate Policy 464

0 comments
The Claims Administrator awarded $178,615.24 to this construction company in Port Charlotte, Florida. Policy 495 criteria were triggered and the Construction Methodology was used to restate the financials.
BP appeals, contending that the program accountant erred in utilizing Claimant’s P&Ls which recorded revenue on the accrual basis and expenses on the cash basis of
accounting. BP argues that the use of P&Ls so mixed is a violation of Policy 464. Accordingly, BP submits a Final Proposal of $129,443.00 or alternatively seeks remand.
The essence of BP’s argument is that it is not possible to match revenue when earned (accrual basis) with expenses when they are incurred (cash basis).
The relevant provision of Policy 464 provides:
No Mixing of P&Ls with Different Accounting Methods: The Claims
Administrator will not mix cash basis P&Ls with some months will
accrual based P&Ls for other months for any purpose. Instead, the
Claims Administrator will use only cash basis P&Ls or accrual basis
P&Ls consistently across all months of the applicable Benchmark
Period and Compensation Periods.
De novo review reflects that the program accountant recognized the different accounting methods utilized by the Claimant: “The Claimant’s P&Ls record revenues using the accrual basis of the accounting whereas expenses are recorded using the cash basis of accounting. BP complains that the dual basis P&Ls resulted in significant variations with Claimant’s tax returns. The Calculation Notes reflect that the program accountant investigated this issue: The DWH accountant noted book to tax net income variances in 2007- 2011. The DWH accountant noted that variances are attributable to different bases of accounting between P&L expenses (cash) and tax
return expenses (accrual). Therefore, no further inquiry is deemed necessary.

Although the Administrator has a policy against mixing cash basis P&Ls for some months with accrual based P&Ls for other months, it does not appear that Claimant’s financials run afoul of this policy. Here, the program accountant did not mix and match cash basis P&Ls for some months with accrual basis P&Ls for other months. Rather, Claimants’ financials consistently used the cash basis for expenses and the accrual basis for revenue.  Thus no violation of policy 464 has been demonstrated,
Finally, it is axiomatic that the Settlement Agreement does not require perfectly matched financials, only those that sufficiently match revenue and variable expenses.
Here implementation of the Construction Methodology, about which BP does not complain, achieved sufficient matching.No error has been demonstrated. Claimant’s
Final Proposal is the correct result.

 

 

 

 

 

 

 

 

 

 

 

 

Leave a Comment

Have an opinion? Please leave a comment using the box below.

For information on acceptable commenting practices, please visit Lifehacker's guide to weblog comments. Comments containing spam or profanity will be filtered or deleted.