Question

A company is facing a class-action lawsuit in the upcoming year. It is possible, but not probable, that the company will have to pay a settlement of approximately $2,000,000. How would this fact be reported in the financial statements to be issued at the end of the current month

Answer 1

Answer:

Disclose the $2,000,000 as a Contingent Liability in the Notes

Explanation:

The Company shall Disclose the $2,000,000 as a Contingent Liability in the Notes.

A Contingent Liability is a Liability whose timing or amount is uncertain