Case 13-08 overview

M international (M) and W Inc (W) decided to enter a long term litigation, due to a patent rights violation. M being the demandant and W the respondent. Not enough information was provided in relation to the charges or the patent. To properly understand the events a chronological descripcion of the litigation is to be provided.

Events: Problems to be addressed

Is necessary to understand the proper and logical accounting literature to address the matter previously presented.
The case it self provides a series of matters to be attends, these matters have to be address in accordance to the General Accepted Accounting Principles.
Matters to be discussed: * The liability to be recorded by M financial statements, for the year-end December 31, 2007 * What adjustments should be done if any, for the year-ended December 31, 2009, financial statements; should the amount be recognized as a 2009 event or as a prior period adjustment. * When should M record a deduction of the previously recorded loss contingency

Solution

To understand the topic to be discussed is necessary to understand its basic components. FASB recognizes that companies are often involved in situations where uncertainty exists about whether an obligation will arise and an amount will be disbursed to fulfill or settle the obligation. This is known as a Contingency in the Accounting world. What is a contingency? ASC 450-10-20 defines it as “An existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an entity that will ultimately be resolved when one or more future events occur or fail to occur.” Meaning that sometimes companies either through experience, educated guest or peers conditions may understand that a probable disbursement may occur in relation to a