medium · Financial Accounting liabilities-bonds-payable
A firm is sued for patent infringement. The firm's legal counsel believes it is 'reasonably possible' but not 'probable' that the firm will lose $10 million.
How should this be handled in the financial statements under ASC 450?
- Accrued as a $10 million liability on the balance sheet.
- Disclosed in the footnotes but not accrued on the balance sheet
- Accrued as a $5 million liability, reflecting the expected value.
- Neither disclosed nor accrued as a liability in the financial statements.
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