Forbes Company Has Been Named as the Defendant in a Class

question 53

Short Answer

Forbes Company has been named as the defendant in a class action lawsuit. Indicate whether each of the following statements regarding the lawsuit is true or false.
_____ a) If the outcome is likely, a liability should be recognized on the balance sheet for the full amount of the suit, even if the company's attorneys estimate the outcome be much lower.
_____ b) If the outcome is likely, but cannot be reasonably estimated, the contingency should be disclosed in the footnotes to the financial statements.
_____ c) If the outcome is reasonably possible, the contingency should be disclosed in the footnotes to the financial statements.
_____ d) Every lawsuit, regardless how frivolous, should be disclosed in the footnotes to the financial statements.
_____ e) If an active hurricane season has been predicted for the Florida gulf coast, businesses in that region should disclose contingencies for catastrophic loss in the footnotes to their financial statements.

---

Definitions:

Lower-Order Needs

Basic human requirements such as physiological and safety needs that must be satisfied before higher-order needs can be addressed.

Esteem

The respect, admiration, or value that an individual holds for themselves or that others hold for them.

Social

Relating to society or its organization; pertaining to activities involving interaction with other people.

Valence

The value to the individual of various work outcomes.