Last year, BP filed an appeal over concerns regarding claimants using cash versus accrual accounting. We blogged about it here. BP was concerned about scenarios in which a contractor, for example, could buy $100,000 worth of materials in June for a project that was set to begin in November; if the contractor received his first installment payment for the project in September, but then choose June, July and August as his “benchmark period,” as opposed to September, October, November, it would result in the appearance of a loss in June, which would, of course, be artificial.
On October 2, 2013, the Fifth Circuit Court of Appeal instructed the District Court (trial court) to issue a “narrowly tailored” injunction stopping the further payment of any claims that did not properly match revenues with expenses. Ultimately, the trial court concluded that “revenue must be matched with the variable expenses incurred by a claimant in conducting its business.” As a result, the trial court recently instructed the Claims Administrator, Patrick A. Juneau, “to adopt and implement an appropriate protocol or policy for handling business economic loss claims in which the claimant’s financial records do not match revenue with corresponding variable expenses.”