The Following Facts Apply to TinyPart Toy Company's Pending Litigation

question 33

Essay

The following facts apply to TinyPart Toy Company's pending litigation as of December 31, 2018:

a. TinyPart is defending against a lawsuit and believes there is a 51% chance it will lose in court. If it loses, TinyPart estimates that damages will be $100,000.
b. TinyPart is defending against another lawsuit for which management believes it is virtually certain to lose in court. If it loses the lawsuit, management estimates damages will fall somewhere in the range of $30,000 to $50,000, with each amount in that range equally likely to occur.
c. TinyPart is defending against another lawsuit that is identical to item (b), but the relevant losses will only occur far into the future. The present values of the endpoints of the range are $15,000 and $25,000. TinyPart's management believes the effects of time value of money on these amounts are material, but also believes the timing of these amounts is uncertain.
d. TinyPart is defending against a fourth lawsuit and believes there is only a 25% chance it will lose in court. If TinyPart loses, it believes damages will fall somewhere in the range of $35,000 to $40,000, with each amount in that range equally likely to occur.

-Indicate how TinyPart would disclose or account for the lawsuit described in part (a) under U.S. GAAP and under IFRS in the financial statements for the year ended December 31, 2018.

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Definitions:

Price-Elastic

Descriptive of demand that is highly sensitive to changes in price, meaning a small price change can cause a significant change in the quantity demanded.

Different Brands

Different brands signify various products or services marketed under distinct names by the same or different companies, emphasizing uniqueness and identity in the marketplace.

Cheapest

Refers to the lowest price option available among similar products or services.

Production Of Pork

The process involved in breeding, raising, and slaughtering pigs for the purpose of obtaining pork products.