The September 1, 2009, edition of CFO.com contains an article by Marie Leone and Tim Reason entitled “Dirty Secrets.” You can access this article at www.cfo.com/article.cfm/

14292477?f=singlepage.

Instructions Read the article and answer the following questions.

(a) Summarize the accounting for contingent items that is provided in this textbook.

(b) The authors of the article suggest that many companies are basically accounting for contingencies on a cash basis. Is this consistent with the approach you described in part (a)?

(c) The article suggests that many companies report one set of liability estimates to insurers and a different (lower) set of numbers in their financial statements. How is this possible, and what are the implications for investors?

(d) How do international accounting standards differ in terms of the amounts reported in these types of situations?

INTERPRETING FINANCIAL STATEMENTS