(L.OBJ. 2) Interpreting an actual company’s contingent liabilities [5—10 min] Fancy Mot...

(L.OBJ. 2) Interpreting an actual company’s contingent liabilities [5—10 min]

Fancy Motors, a motorcycle manufacturer, included the following note (adapted) in its annual report:

Requirements

1. Why are these contingent (versus real) liabilities?

2. How can a contingent liability become a real liability for Fancy Motors? What are the limits to the company’s product liabilities in the United Scares?