Bell Industries is a multinational company. In preparing the annual financial statements, the auditors met with Bell’s attorneys to discuss various legal matters facing the firm. For each of the following independent items, determine the appropriate disclosure:
(a) Bell is being sued by a distributor for breach of contract. The attorneys believe there is a 30% chance Bell will lose the suit.
(b) One of Bell’s subsidiaries has been accused by a federal agency of violating numerous environmental laws. The company faces significant fines if found guilty. The attorneys believe that the subsidiary has complied with all applicable laws, and they therefore place the probability of incurring the fines at less than 10%.
(c) A subsidiary operating in a foreign country whose government is unstable was recently taken over by the government and nationalized. Bell is negotiating with representatives of that government, but company attorneys believe the probability of the company losing possession of its assets is approximately 90%.