4Ed_CCH_Forensic_and_Investigative_Accounting_Solutions_12

4Ed_CCH_Forensic_and_Investigative_Accounting_Solutions_12...

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© 2009 CCH. All Rights Reserved. Chapter 12 141 Chapter 12 Computing Economic Damages CHAPTER SUMMARY Overview Cases involving wrongful death, wrongful discharge, complete or partial disabilities, and other similar situations that take into account the economic value of persons, require the use of economic concepts that have not been covered yet. This chapter will address some of those additional issues that are useful in calculating economic damages in other types of dispute situations. The Nature of Economic Damages ¶12,001 Wrongful Discharge Case Case Description. Jeff Evans has operated the Evans Marine Services business for the last twenty years. His business is located across the street from the Lakeside County Marina. This marina, located on a large lake in south Florida, is a popular stopping point for many South Florida boaters. One of the main services of the county marina is the gas docks that are located at the marina. In 2003, Evans secured a f ve-year renewable contract to operate the Lakeside County Marina. The contract with Lakeside County covered the period from 2003 through 2007 and required Jeff Evans to provide various services to transient boaters. The Damage Calculations of Mr. Evans’s Expert. Figure 12.4 presents the damage calculations of Jeff Evans’s expert. Included in the expert’s damage calculations are a number of components. Some of the larger items are lost wages, lost pro f ts on fuel sales, and also several other smaller items. Other Components of the Damage Calculation. Two other components of the damage calculation are the FICA tax payments that the employer would have made on the lost salary and the health insurance premiums that the employer would have paid had Mr. Evans not been f red. Discounting Amounts to Their Present Value. In their book, Economic/Hedonic Damages: The Practice Book for Plaintiff and Defense Attorneys , Brookshire and Smith explain the need for discounting damage estimates to their present value and the authors describe many considerations for selecting the appropriate discount rate. In simple terms, it is necessary to discount damage estimates to their present value in order to incorporate the time value of money into the analysis. The Damage Calculations of Lakeside County’s Expert. The damage estimate of defendant Lakeside County’s expert is presented in Figure 12.5. As might be expected, this estimate is lower than the damage estimate of the plaintiff’s expert. The damage estimate of the defendant’s expert is less than 25 percent of that of the plaintiff’s expert. Other Components of the Damage Calculation. As with the Plaintiff’s expert damage estimate, there are two other components of the damage calculation. One is the FICA tax payments that the employer would have made on the lost salary, and the other is the health insurance premiums that the employer would have paid had Mr. Evans not been f red. Discounting Amounts to Their Present Value.
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This note was uploaded on 01/12/2012 for the course ACCT 555 taught by Professor Briggs during the Spring '11 term at University of Texas at Dallas, Richardson.

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4Ed_CCH_Forensic_and_Investigative_Accounting_Solutions_12...

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