Notes 4

Notes 4 - o How much liability did airlines face after Sept...

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Balance Sheet: Liabilities Liability recognition criteria: o Recognition: Run through a financial statement o Credit: Liability/ payable (it grows) o Debit: Asset Expense/ loss Obligation involves probable future sacrifice of resources: o For ex., payment of debt o “Probable” up for interpretation by management Firm has little or no discretion to avoid it Event giving rise to obligation has occurred o Ex. A fire has occurred and you don’t have insurance Amount needed to satisfy obligation is reasonably estimable:
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Unformatted text preview: o How much liability did airlines face after Sept. 11? Ex. loss will be $1 bil. To $3 bil. range Required to use low end of range, $1 bil., on B/S Write extensive footnote o Co. X had following contingent losses: $2 to $4 bil. As analyst, what amount would you consider putting in ratios? • $4 minus $2 bil. Equals $2 bil. Added to ratios • The other $2 bil. (the low estimate) would already be there...
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This note was uploaded on 06/10/2011 for the course BUSI 407 taught by Professor Bowen during the Spring '11 term at UNC.

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Notes 4 - o How much liability did airlines face after Sept...

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