Danle Corporation – Case 10-5
Discuss whether you believe that the conclusion reached by Danle to omit disclosure regarding to the class-action litigation was appropriate for the year ended December 31, 2009.

In our opinion, it was not appropriate for Danle Corporation to omit disclosure relating to the class action lawsuit for the year ended December 31, 2009.
First, it must be noted that ASC 450-20-25-2 indicates the following:
25-2 An estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:
a. Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.
b. The amount of loss can be reasonably estimated.
In this case, management does not believe that it was probable that a loss would occur and does not believe that the amount could be reasonably estimated, however, ASC 450-20-50-3 states the following:
50-3 Disclosure of the contingency shall be made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred and either of the following conditions exists:
a. An accrual is not made for a loss contingency because any of the conditions in paragraph 450-20-25-2 are not met.
b. An exposure to loss exists in excess of the amount accrued pursuant to the provisions of paragraph 450-20-30-1.
Given that no accrual was previously made due to the fact that the probable and