Unformatted text preview: liability depending upon the chance of loss. If the chance of losing the law suit is more likely than not it should be reported in the financial statement as provision for doubtful loss on the other hand if the chance of losing the law suit is not more likely than not than it should be treated as contingent liability. As contingent liability do not form part of the financial statement but is shown by way of foot note, it should be shown as a foot note. In the given case Constantine’s lawyers states that it is more likely that the company will lose the law suit and they can incur a liability anything between $400,000 to $2,000,000 more likely $1,000,000. Thus the company should make a provision for the said amount and must disclose in the notes to account the reason for such provision....
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This note was uploaded on 10/03/2011 for the course ACCOUNTING 103 taught by Professor Ngo during the Spring '11 term at Berkeley.
- Spring '11