Under What Conditions Is a Pending Lawsuit Recognized in a Company's

question 107

Essay

Under what conditions is a pending lawsuit recognized in a company's financial statements? Under what conditions is a pending lawsuit disclosed in the notes to the financial statements?

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Definitions:

Incidental Beneficiary

An incidental beneficiary is a third party who may benefit from a contract between two other parties, even though the benefits were not directly intended for them.

Privity of Contract

The legal principle that a contract confers rights and imposes obligations only on the parties to the contract, barring any third party from enforcing or interfering with the agreement.

Policy Proceeds

The amount paid out on an insurance policy, typically upon the occurrence of the event insured against.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, designed to harmonize legal standards across states.