ACTG 493, Accounting Cases, Research and Analysis Group Case 1 Memorandum To: Professor Siyi Li From: Group 4 Date: July 5, 2016 Subject: eVade Pays Up (Deloitte Trueblood Case 14-07) I. Case Description and Key Facts eVade is an online retailer that fulfills its orders by shipping its products directly to customers across all 50 states in the U.S. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various
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accounting guidance regarding the judgment issued in the Campbell v. Martin lawsuit, we have come to the following conclusion: We recommend Martin adjust the $18 million loss contingency recorded in 2011 to $19 million in the current period. This recommendation is in line with FASB guidance on accounting for contingencies as detailed in the Accounting Standards Codification. FACTS These are the facts as we understand them. In 2011 Martin’s management accrued a loss of $18 million based on
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February 23, 2015 Subject: Treatment of Loss Contingency Overturned on Appeal I would like to give some guidance on a relevant accounting issue that has arisen at your company, M corporation. There has recently been a litigation against the company and I believe that the best way to account for it would be to record the loss in a contingent liability account. This account will ensure that the company’s statements properly illustrate the current situation by matching the cost with the events
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Client Response II ACC/541 January 31, 2011 Client Response II To: ABC Warehouse CC: Date: [ 1/31/2011 ] Re: Loss Contingencies Reporting Requirement for Lawsuit Contingencies The implication to the company depends upon outcome of the lawsuit. If the outcome results in a loss to the company, the loss should be accrued as estimated into the company’s financials, provided that the loss can be reasonably estimated and noted, in detail per FASB Codification section 450-20-25-2
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“potentially” can be reasonable assumed to mean reasonably possible, which is defined as more than remote but less than probable. ASC 450-20-50-3 states, “Disclosure of a contingency shall be made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred,” and “an accrual is not made for a loss contingency because any of the conditions in paragraph 450-20-25-2 are not met.” As previously stated no accrual was made because the litigations were not considered probable
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considered a loss contingency? 2. Will the loss be accrued, and if so for what amount? 3. What disclosures should be made in the company’s financial Statement? Analysis – Issue 1: Is the lawsuit considered a loss contingency? FASB Accounting Standards (ASC) 450-20 provides information on contingencies, covering the definition of a loss contingency as well as providing examples of loss contingencies. Contingencies are described in (ASC) 450-20-20 as follows: Contingency: An existing condition
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Case Study: Contingency: BP a. A contingent liability is a potential liability that depends on a future event occurring or not occurring; or past events that are not recognized because the outcome is not probable or the amount of obligation cannot be measured. Examples: Law suits and government agencies investigations and product warranties. A contingent liability and the related contingent loss are recorded with a journal entry only if the contingency is both probable and the amount can
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Scenario 1 Energy Inc. has a present obligation (IAS 37-17) and probable liability (ASC 450-20-25-2) on December 31, 2011 as a result of a past event, the contamination of the land, because it is virtually certain that a draft law requiring cleaning up will be enacted. It is probable (more likely than not) that Energy Inc. will be required to transfer economic benefits in settlement which is an outflow of resources embodying economic benefits in settlement (IAS 37-23). The amount of the obligation
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for FIN324 2016. CHAPTER Liabilities (including employee benefits), Equity And off balance sheet transactions Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3-3 Overview of Chapter Companies operations are financed by various sources: • Liabilities • Capital (Stockholders’ Equity) • Off balance sheet transactions 3-4 Companies’ Financing Sources Liabilities Capital (Stockholders’
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of Liabilities Liabilities are classified in different types. The two main categories of these are current liabilities and long-term liabilities. Current Liabilities Current liabilities are often loosely defined as liabilities that must be paid within a single calender year. For firms with operating cycles that last longer than one year, current liabilities are defined as those liabilities which must be paid during that longer operating cycle. A better definition, however, is that current liabilities
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