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Memo 2.1 - MEMORANDUM Date To Files American Chemical...

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MEMORANDUM Date: 09/14/2011 To: Files – American Chemical Corporation From: Venk Seelam Issue: How should ACC accrue and disclose the trial decision on their financial statement from January 11, 2010? Recommendation: American Chemical Corporation should accrue and disclose the loss contingency on its 2010 Condensed Financial Statements from the lower court’s trial decision in the lawsuit from the Environmental Protection Agency. Sources : See attached research table Discussion: This memo will discuss the accounting standards and adjustments for accruing and disclosing the loss contingency for American Chemical Corporation (ACC). Mr. Molina and the management team chose not to accrue and disclose the loss in the lower court’s trial decision; this violates the FASB accounting standards. On January 11, 2011 a lower trial court had imposed a $70 million fine payable to the Environmental Protection Agency (EPA) for a series of pollution law violations. The company immediately appealed to the U.S. District court and had set aside the fine to a lower cost.
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