Close
Updated:

Two complications of global law departments paying outside counsel (currency and tax)

A senior lawyer at a global giant explained to me that currency fluctuations add considerable complexity to his law department’s ability to state precisely what it pays in outside fees. If you pay a bill in January in pound sterling, a second one that month in US dollars, and a third in Euros, how do you account for the total payments that month when you compile your numbers year to date at the end of December? I think the proper accounting is to convert each payment at the date made to the common currency in which the company reports. I am no accountant, however, so I welcome enlightenment.

The second twist turns on taxes as well as the difficulty of expropriating income from subsidiaries. To reduce overall taxes, it may make sense to pay outside counsel bills from a certain subsidiary (which by the way adds to the conversion challenges and the difficulty of collecting data on spending).

Alternatively, or additionally, it may make sense to pay bills from a subsidiary from which it is otherwise difficult to extract earnings. Here, too, like accounting for payments in different currencies, I swim in riptides and welcome any life preservers of explanation.