easy · Financial Accounting liabilities-bonds-payable
An entity has a lawsuit pending at year-end. Management and legal counsel determine that an unfavorable outcome is 'probable' and the loss can be reasonably estimated at $100,000.
How should this be handled under ASC 450?
- Accrue a $100,000 liability and record it in Other Comprehensive Income (OCI)
- Accrue a $100,000 liability and record a $100,000 loss in the income statement
- Disclose the lawsuit in the footnotes only, with no accrual
- Record the loss only when the final court judgment is issued
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