The following excerpt was taken from the 1990 annual report of Exxon Corporation. 15. LITIGATION On March 24, 1989, the Exxon Valdez, a tanker owned by Exxon Shipping Company, a sub¬ sidiary ofExxon Corporation, ran aground on Bligh Reefin Prince William Sound offthe port of Valdez, Alaska, and released approximately 260,000 barrels of crude oil. More than 215 lawsuits, including class actions, have been brought in various courts against Exxon Corporation and certain ofits consolidated subsidiaries. Most ofthese lawsuits seek unspeci¬ fied compensatory and punitive damages; several lawsuits seek damages in varying specified amounts. Certain of the lawsuits seek injunctive relief. Of these lawsuits, more than 40 have been dismissed or settled. The State ofAlaska hasfiled a suit in Superior Court in Alaska against Exxon Shipping Company, Exxon Corporation and others seeking substantial civil penalties and unspecified damages arising from the oil spill. On February 27, 1990, an indictment was returned in the Chapter lO Economic Consequences, Current Liabilities, and Contingencies 523 United States District Court in Anchorage, Alaska, charging Exxon Shipping Company and Exxon Corporation with violation ofthe Refuse Act, the Migratory Bird Treaty Act, the Clean Water Act, the Waterways Safety Act and the Dangerous Cargo Act. The potential total costs relating to the matters described above are difficult to predict and may not be resolved for a number of years. It is believed that the ultimate outcome, net of reserves already provided, will not have a materially adverse effect upon the corporation's operations orfinancial condition. REQUIRED: Discuss Exxon’s disclosure in terms of (1) the methods used to account for loss contingencies and (2) the potential economic consequences associated with Exxon’s disclosure and method of accounting treatment.