Financial Accounting

Question 1

Read the following adaptation of an article entitled 'CBA in payout on "toxic" products' by Leo Shanahan that appeared in The Australian on 4 April 2015.

In 2012 a claim was lodged in the Federal Court against the Commonwealth Bank by Gloucester Council and an investment company, Clurname, alleging that CBA had breached its duty of care and engaged in misleading and deceptive conduct in selling them 'toxic' investments, ignoring their request for conservative investments. Eventually around 35 investors, who had been sold $140 million worth of AAA-rated collateralised debt obligations (CDOs), participated in the class action.

CBA settled with the investors for $50 million, including legal fees, and agreed to pay $1.5 million to International Litigation Partners, funder of the class action.

The bank refused to comment on the settlement, saying the court still had to approve it, although CBA had previously said the investor's claim had no merit. In the course of the case it had been revealed that CBA had settled with at least 14 other CDO investors.

CBA had earlier been faced with the fallout from the frauds perpetrated by some of its financial planners, which led to public apologies and expensive settlements.

REQUIRED

On the basis of the brief information provided, consider how, if you were the chief accountant at the Commonwealth Bank, the case would be disclosed within the annual report of CBA. What factors would you consider in determining the form the disclosures should take, and in which years the disclosures would be made?