Econ 136B Research Assignment

Econ 136B Research Assignment - Econ 136B Perm: . To: Joyce...

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Perm: . To: Joyce Chin From: Date: June 2, 2009 Re: Accruals for loss contingencies Executive Summary Based on the information gathered about possible contingencies arising, I have come to the conclusion that we must accrue losses for the chemical leak as well as the gain contingency for the lawsuit. However, the sexual harassment claim should not be accrued due to the fact that it occurs after the date the financial statements are released. This violates one of the main clauses necessary to be an accrued liability. Chemical Leak- $250 million in damages Gain contingency- $75 million Sexual Harassment Lawsuit-$5 million (but falls outside period of release of financial statements) Background Summary Chemical Leak On January 17, 2009, Chem. Corp discovered a chemical leak that happened on December 22, 2008. The chemical leak released a deadly toxin that damaged local fishing grounds. The EPA estimates damages to be $250 million… Defective Product On December 27, 2008, I was told that we were suing Co. X for selling us defective products. We have a 90% chance of winning $75 million in the case according to our lawyers…. . Sexual Harassment Claim
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This note was uploaded on 06/30/2009 for the course ECON 136B taught by Professor Anderson during the Spring '08 term at UCSB.

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Econ 136B Research Assignment - Econ 136B Perm: . To: Joyce...

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