Anonymous

How Will Losing A Lawsuit Effect Their Financial Statement?

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Anonymous Profile
Anonymous answered
If the cause of the lawsuit occurred before the fiscal year ends but before the financial statements are issued, the loss is accrued (the outcome of the lawsuit can be used to determined the cost) and becomes a liability on the balance sheet.  A disclosure in the notes to the financial statements is appropriate.

If the cause of the lawsuit occurred after the fiscal year ends but before the financial statements are issued and the cost is significant, a disclosure is appropriate, no accrual is needed
Arthur Wright Profile
Arthur Wright answered
A big enough of a lawsuit lost and it will blow their financial statement right out of the water. It will effect everything as somewhere this loss has to come from without actually effecting the companys survival

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