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Unformatted text preview: RESEARCH CASE #3 for ACCT 401 Spring 2011 DUE DATE: TURN IN TWO COPIES at the beginning of class on Tuesday, April 19 Before doing anything, re-read the Guideline for Research Cases Case modified from the Trueblood Case Series Kansas Corporation (Kansas), a public company, conducts business activities primarily related to the design, development, manufacture, and assembly of passenger cars, recreational and sport-utility vehicles, minivans, and trucks. Over the past three years, two claims were filed against Kansas by automotive mechanics and surviving family members seeking recovery because of their alleged exposure to asbestos. Kansas used asbestos in the manufacturing of brake shoes and gaskets because of its heat resistance. The following information summarizes Kansass exposure to the two asbestos claims over the past three years. The amount of damages sought in the complaints is considered material to the Kansass financial statements for each period presented. Fiscal Year 2004 In November 2004, Kansas was served a complaint in the U.S. District Court alleging that 50 mechanics suffered severe illnesses that led to death or disability as a result of exposure to asbestos from parts manufactured by Kansas. The case was brought against Kansas as a class- action lawsuit seeking damages totaling approximately $100 million. Kansas did not believe the asbestos used in the manufacturing of the brake shoes and gaskets led to the mechanics illnesses and immediately retained external legal counsel to vigorously defend the claim made against Kansas in this complaint. Since this legal matter was in its early stages of discovery and development, Kansas determined that the risk of potential loss at that time was remote and no amount of potential damages could be reasonably estimated. Therefore, Kansas made no disclosure of the legal matter in its Form 10-K for the year ended December 31, 2004....
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This note was uploaded on 02/22/2012 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.
- Spring '10