Question

I need assistance on writing a paper for the following case.

Your company has just been named as a defendant in a law suit related to a leak of chemicals, from one of your company’s plants onto private property. The plaintiff is suing for $5 million in damages; your company’s attorneys believe the ultimate amount of the loss could range between $1 million and $3 million, with no amount in the range more likely than other amounts in the range. The lawsuit is expected to be resolved in the middle of next year.

Citing from authoritative literature, prepare a brief accounting issues memo to the files addressing (1) whether a loss should be accrued, and for what amount, and (2) what disclosures should be made in the company’s financial statements.

Remember use primary source research when making your arguments.

Footnotes, citations, references and bibliographies are essential. If they are missing the paper will receive a -0-. You are forewarned.

Answer 1

Under Us GAAP if no amount in the range more likely than other amounts in the range and entity should record the minimum amount in the range as the accued liability as per ASC-450-20-30-1

So in this case the minimum amount in the range is $1 million and that should be accured as contingent liability. The saame basis of considering the ccontingent loss should be disclosed in the financials with the details of the range. the probable date of resloving the case and details of case