medium · Financial Accounting liabilities-bonds-payable
A company believes it is 'probable' it will win a lawsuit and receive a $2,000,000 settlement.
How should this be reported in the financial statements?
- Do not accrue the gain; disclosure in the notes is permitted but should be cautious.
- Accrue the gain only once collection is certain beyond any reasonable doubt
- Accrue the gain now as a 'Contingent Asset' since realization is deemed probable
- Recognize the gain in Other Comprehensive Income until the settlement cash is collected
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