Loblaw Companies Limited (which owns Shoppers Drug Mart) reported the following information about contingencies in the notes to its December 31, 2014, financial statements:
LOBLAW COMPANIES LIMITED
Notes to the Consolidated
Financial Statements December 31, 2014
Contingent Liabilities (excerpt) Legal Proceedings The Company is the subject of various legal proceedings and claims that arise in the ordinary course of business. The outcome of all of these proceedings and claims is uncertain. However, based on information currently available, these proceedings and claims, individually and in the aggregate, are not expected to have a material impact on the Company.
Shoppers Drug Mart has been served with an Amended Statement of Claim in a proposed class action proceeding that has been filed under the Ontario Superior Court of Justice by two licensed Associates, claiming various declarations and damages resulting from Shoppers Drug Mart's alleged breaches of the Associate Agreement, in the amount of $500 million. The proposed class action comprises all of Shoppers Drug Mart's current and former licensed Associates residing in Canada, other than in Québec, who are parties to Shoppers Drug Mart's 2002 and 2010 forms of the Associate Agreement. On July 9, 2013, the Ontario Superior Court of Justice certified as a class proceeding portions of the action. While Shoppers Drug Mart continues to believe that the claim is without merit and will vigorously defend the claim, the outcome of this matter cannot be predicted with certainty.
Instructions
Why would Loblaw disclose information about these legal disputes, including the amount of the potential loss, in the notes to the financial statements instead of accruing an amount for these as liabilities in its accounting records?