The January 2011 board minutes indicate that a competitor has filed a complaint in the U.S. District Court asserting antitrust and unfair competition claims against the company.

A customer is suing the company for $250,000 on the basis of damage to their child's eyes as a result of excessive use of the game. Legal counsel believes this is a frivolous suit and no action will result, but the company is considering an out of court settlement of $10,000 to avoid damaging publicity.

how you would determine the materiality of the lawsuits and proper disclosures in the financial statements?