1. Review the definition of liabilities from FASB Statement of Financial Accounting Concepts No. 6. Does the probability-based measure or the fair value-based measure best fit the definition of a liability?
2. Review the objective of general-purpose financial reporting in FASB Statement of Financial Accounting Concepts No. 8. Which set of measurement rules best satisfies the objective of financial reporting.
3. Can you think of any reasons, other than the difference in measurement rules, that BD would report the liability $1.2 billion higher than Bard reported it? Might there be different incentives for the company with a product failure than with a company valuing net assets in corporate acquisition?
4. You are a member of the FASB with the obligation to set standards that conform to the conceptual framework. If this question were to come up, which set of standards would you favor; the current standards or standards based on fair value? Why?