Based on the following statement made on General Motors the recall related

Based on the following statement made on general

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Based on the following statement made on General Motors, the recall-related warranties amply to the events that should be disclosed. “In connection with ongoing…to customer satisfaction we have incurred incremental charged for the estimated cost of….” (2015 Financial Statement, General Motors Company, page 29) FASB ASC 460-10-50-7 Paragraph 460-10-25-6 states that an inability to make a reasonable estimate of the amount of a warranty obligation at the time of sale because of significant uncertainty about possible claims precludes accrual. That paragraph also addresses related implications. Paragraphs 450-20-50-3 through 50-6 provide disclosure guidance for circumstances in which no accrual is made for a loss contingency. In those circumstances, the disclosures required by that paragraph shall be made. General Motors Company considered “the estimated costs related to recall campaigns are accrued at the time of vehicle sale in GMNA and when probable and reasonably estimable in other geographical regions.” (2015 Financial Statement, General Motors Company, page 63) The treatment for the warranties meets the requirement of Disclosure section in Guarantee topic showed above. General Motors Company also practices the pending content (FASB, ASC 460-10-50-8) relative to the detailed information on disclosure. “ When a loss is not both probable and estimable, an accrual is not recorded, but disclosure of the
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contingency is required to be made when there is at least a reasonable possibility that a loss or an additional loss has been incurred. The disclosure should indicate the nature of the contingency and give an estimate of the possible loss or range of loss or state that such an estimate cannot be made. Rule 10-01(a)(5) of Regulation S-X requires the disclosure of material contingencies in interim financial statements.” (Sample Letter Sent to Public Companies on Accounting and Disclosure Issues Related to Potential Risks and Costs Associated with Mortgage and Foreclosure- Related Activities or Exposures tm) According to the letter, General Motors Company did not completely comply with the requirement made by SEC. General Motors Company failed to disclose the recall-related events in other geographical regions but in GMNA because it cannot exclude any recall possible due to ignition switch problems and has reasonably at least possibility that recall could be happened in other regions. In this case, the information related potential warranties in other regions should be disclosed.
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  • Spring '18
  • Anwar Y. Salimi

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