Microsoft Corporation is the defendant in numerous lawsuits claiming unfair trade practices. Microsoft has strong incentives not

Question:

Microsoft Corporation is the defendant in numerous lawsuits claiming unfair trade practices. Microsoft has strong incentives not to disclose these contingent liabilities.

However, GAAP requires that companies report their contingent liabilities.

Requirements

1. Why would a company prefer not to disclose its contingent liabilities?

2. Identify the parties involved in the decision and the potential consequences to each.

3. Analyze the issue of whether to report contingent liabilities from lawsuits from the following standpoints:

a. Economic

b. Legal

c. Ethical

4. What impact will 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?

Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a... GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...