One week ago, Jason Williams was appointed manager of the company for which you work. He has looked at the draft of the annual report for last year, scheduled to be issued in a few days. He states that the company needs to "take no chances" and should be conservative in its reporting. He has asked for your opinion on the appropriate treatment for the situation below. The company is engaged in several lawsuits, some of which are very material. The company's lawyer and its former manager think the suits are almost certain to be decided in favor of your employer and, therefore, they plan to ignore them in the financial reports. The new manager wants to either show a potential loss as an expense or disclose the lawsuits in notes to the statements. Multiple Choice disclose the existence of the lawsuits record a loss of the lawsuit.