A large retailer was sued nearly 5,000 times in a recent year—about once every two hours every day of the year. It has been sued for everything imaginable—ranging from falls on icy parking lots to injuries sustained in shoppers’ stampedes to a murder with a rifle purchased at one of its stores. The company reported the following in the notes to its financial statements:

Instructions

(a) Explain why the company does not have to record these contingent liabilities.

(b) Comment on any implications for analysis of the financial statements.