The reason for not disclosing the contingent liability by Company.

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Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

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A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. a. Explain why expected loss and gain are treated differently in accounting in the situation of a lawsuit. b. Give an example of a company that experienced an expected loss and gain due to a lawsuit. Provide the disclosure in their financial statements on gains and losses.

A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. Required: 1. Give an example of one company that experienced an expected loss due to a lawsuit and one company that had an expected gain. Provide the exact disclosure in their financial statements for both gains and losses.

A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. Does the expected loss meet the definition of a liability found in the conceptual framework? Explain Does the expected gain meet the definition of an asset found in the conceptual framework? Explain Why do you think accountants treat these seemingly similar situations differently? Explain

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

Expert Solution & Answer

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

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Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

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Answer 5

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

Answer 6

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

Answer 7

Chapter 8, Problem 8.56EIC

1.

To determine

The reason for not disclosing the contingent liability by Company.

Answer 8

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

Answer 9

2.

To determine

To Identify: The parties involved in the decision and the potential consequences to each.

Answer 10

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 11

3. a

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 12

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 13

3. b

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 14

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 15

3. c

To determine

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

Answer 16

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

Answer 17

4.

To determine

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

Answer 18

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Answer 19

Expert Solution & Answer

Answer 20

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Answer 21

Ch. 8 - All of the following are reported as current...Ch. 8 - Prob. 2QC Ch. 8 - Prob. 3QC Ch. 8 - What is accounts payable turnover? a.Purchases on...Ch. 8 - Prob. 5QC Ch. 8 - Nicholas Corporation accrues the interest expense...Ch. 8 - Phoebe Corporation signed a six-month note payable...Ch. 8 - Prob. 8QC Ch. 8 - Backpack Co. was organized to sell a single...Ch. 8 - Prob. 10QC

The reason for not disclosing the contingent liability by Company.

Solution Summary: The author explains the reasons for not disclosing a company's contingent liability.

Concept explainers

The reason for not disclosing the contingent liability by Company.

To Identify: The parties involved in the decision and the potential consequences to each.

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints

The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.

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Chapter 8 Solutions