Suppose a large manufacturing company is the defendant in numerous lawsuits claiming unfair trade practices The company has strong incentives not to disclose these contingent liabilities However, ASPE requires companies to report their contingent liabilities Required 1 Why would a company prefer no...

Req 1 A company would prefer not to disclose its contingent liabilities because they cast a shadow o ...

Suppose a large manufacturing company is the defendant in numerous lawsuits claiming unfair trade practices. The company

Question:

Suppose a large manufacturing company is the defendant in numerous lawsuits claiming unfair trade practices. The company has strong incentives not to disclose these . However, ASPE requires companies to report their .
Required
1. Why would a company prefer not to disclose its ?
2. Describe how a bank could be harmed if a company seeking a loan did not disclose its .
3. What is the ethical tightrope that companies must walk when they report their ?
Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a...