Lawsuit brought by former management-level employee GCF has been downsizing for the last several years and as a result, several employees at multiple levels in the organization have been terminated. Most have accepted their fates with little resistance particularly when offered severance packages that lessened the financial impact. Robert Parker is not one of these individuals. Jenkins is a 58-year old mid-level manager who had consistently received good, if not very good, performance evaluations for the last several years. He was terminated in early November of 2017. The individual who assumed Jenkins' responsibilities at GCF, Laura Edwards is a 32 year-old recent MBA graduate from Texas AMI University. Her annual salary is $65,000 while Jenkins was making $90,000 at the time of his termination. Parker accepted his severance package but then proceeded to sue GCF for $1,000,000 for age discrimination. In two separate discussions with GCF's legal counsel, Mr. Parker initially offered to settle the lawsuit for $750,000 and later offered to settle for $725,000 plus $50,000 in legal fees. The company's legal counsel is not at all optimistic about prevailing in the lawsuit if it goes to trial and is therefore advising GCF to seriously consider the proposed settlements. If the lawsuit does eventually go to trial, GCF's legal counsel indicated that the trial will not commence for at least six months. In addition, the Texas court system provides for a series of appeals should CGF initially lose the case. As a result, it could be several years before the outcome of any litigation is finalized. Due to uncertainty as to accounting rules, less-than-favorable economic times and sagging profits at GCF, no accrual for the pending litigation has been made nor has any footnote disclosure been prepared. Instructions from the audit engagement manager The audit engagement manager has assigned you the task of researching the accounting issue described below and preparing an accounting issue memorandum to address the issue. ' Accounting Issue: 'Whether an accrual for the pending litigation should be recorded andfor whether any disclosure of the pending litigation is required for the fiscal year ended December 31, 2017. For this issue, if you determine that accrual is necessary, the engagement manager has instructed you to include in your memorandum the journal entry necessary to record the appropriate accrual as well as an explanation of the required entry including your rationale for the amount accrued