Question
I'm are chief financial officer of Camp Industries. Camp is the defendant in a $44 million class-action suit. The company's legal counsel informally advises Im
I'm are chief financial officer of Camp Industries. Camp is the defendant in a $44 million class-action suit. The company's legal counsel informally advises I"m that chances are remote that the company will emerge victorious in the lawsuit. Counsel feels the company will probably lose $30 million. I recall that a loss contingency should be accrued if a loss is probable and the amount can reasonably be estimated. A colleague points out that, in practice, accrual of a loss contingency for unsettled litigation is rare. After all, disclosure that management feels it is probable that the company will lose a specified dollar amount would be welcome ammunition for the opposing legal counsel. He suggests that a loss not be recorded until after the ultimate settlement has been reached.
How do I address facts, ethical issues and values, who the stakeholders are and the impact on them, different alternatives, possible consequences, and recommendation?
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