Swift Drug Company Is Being Sued This Year for a Wrongful

question 87

Essay

Swift Drug Company is being sued this year for a wrongful death due to violation of FDA rules. There is no doubt that Swift is guilty and the settlement is reasonably estimable at $10 billion payable evenly over 10 years starting next year. Briefly explain how Swift would address this in its current year financial statements.

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Definitions:

Income From Operations

The earnings generated from a company's regular, core business operations.

Net Cash Flows

The difference between a company's cash inflows and outflows within a specified period.

Average Rate

A value that represents the central tendency of a set of numbers, calculated by dividing the sum of all values by the number of values.

Salvage Value

The estimated resale value of an asset at the end of its useful life.