Issue 1. Microsoft Corporation is the defendant in numerous lawsuits claiming unfair trade practices. Microsoft has strong incentives not to disclose these contingent liabilities. However, accounting standards require 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