Question

Your company has just been named as defendant in a lawsuit 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 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.
Cite from the FASB Codification an research memo to address whether a loss should be accrued, and for what amount, and what disclosures should be made in the company's financial statements.

Answer 1

Answer:

Explanation:

FASB Accounting for possibilities give that An expected misfortune from a misfortune possibility will be gathered by a charge to salary if both of the accompanying conditions are met:

a. Data accessible before issuance of the budget reports demonstrates that it is likely that a benefit had been hindered or an obligation had been brought about at the date of the fiscal summaries. It is verifiable right now it must be plausible that at least one future occasions will happen affirming the reality of the misfortune.

b. The measure of misfortune can be sensibly evaluated.

In the given case the primary condition is met i.e it is sure or plausible that an obligation is acquired yet the second condition that the measure of misfortune can be sensibly evaluated isn't met as a scope of the misfortune is given.

Along these lines, the misfortune ought not be gathered rather an unexpected risk ought to be appeared for $3 millions on reasonability idea.