Question

- The jury reached a verdict on Sept. 25, 2009, and a judgment was ordered in favor of S firm. the judgement required T to pay $14M.

- In Nov. 2009, T filed a notice of appeal with the court of appeals

- Dec. 2010, the court of appeals issued a ruling in favor or T's appeal and reversed the lower courts ruling on the matter. The court of appeals overturned the jury verdict and the $14 M judgment against S.

-Dec. 24,2010, management of T determined this matter was closed upon discussion with in house legal counsel.

a) For the year of dec 31, 2010 financial statements, what about should T firm record as a liability? which FASB code does this apply to?

Answer 1

As per the details of the Case, in Dec 2010, on filing of appeal, the Court of Appeals issued a ruling in favor or T's appeal and reversed the lower courts ruling on the matter. The court of appeals overturned the jury verdict and the $14 M judgment against S.

The same was also confirmed by the in house legal council as a closed issue.

In view of the above points, T Firm shall not record any liability in its Financial Statements for the year ending 31 December, 2010.

FASB Code : Topic 450 Contingencies.