Plans for iPhone assembler Foxconn to acquire Sharp, allowing it to move into making displays for future devices, now appear in significant doubt. Initially reported in Japan as a done deal, the WSJ quickly reported that Foxconn was “delaying” signing – and the same source today reports that talks have broken down.

Sharp Corp on Friday scrambled to salvage a sale to Taiwanese electronics assembler Foxconn as its stock plunged and investors questioned whether the companies could restore trust to make their proposed marriage work after an 11th-hour breakdown in talks … 

The stumbling block is that Sharp would come with potential liabilities of around $1.3B, including potential tax claims and lawsuit awards against the company. Sharp says all this was properly reported in its accounts, but it appears that Foxconn did not have full knowledge of these risks until an email from Sharp on Wednesday,

According to a person familiar with the matter, Foxconn chairman Terry Gou received a list of liabilities in an email from Sharp on Wednesday morning, during a meeting at Foxconn headquarters in Taipei. Dozens of people were in the room and they “went berserk,” this person said.

The WSJ goes into a lot more detail for those interested, but for now it seems we’ll have to see whether or not the deal eventually goes through.