[SOLUTION] Financial Statement

Instruction:Briefly answer the seven questionsRequired:What is a loss contingency, and why is it disclosed in financial statements? Which of the preceding examples represents a recognized loss contingency?Borden has a $26 million liability on its 2000 balance sheet for “probable environmental remediation and restoration.” But the company says actual remediation and restoration costs could be up to $16 million more than this amount. Why doesn’t Borden’s balance sheet liability include the additional $16 million?Why doesn’t Exxon report a dollar amount for its litigation cases? Does the lack of a specific dollar amount in Exxon’s cases mean that stock analysts will just ignore the litigation when valuing the company? Why or why not?In its 2002 annual report, Exxon (now ExxonMobil) had more to say about the Exxon Valdez incident:[O]n September 24, 1996, the United States District Court for the District of Alaska entered a judgment in the amount of $5.058 billion. The District Court awarded approximately $19.6 million in compensatory damages to plaintiffs, $38 million in prejudgment interest on the compensatory damages, and $5 billion in punitive damages. . . . The District Court stayed execution on the judgment pending appeal. . . . ExxonMobil appealed the judgment. On November 7, 2001, the United States Court of Appeals for the Ninth Circuit vacated the punitive damage award as being excessive under the Constitution and remanded the case to the District Court for it to determine the amount of the punitive damage award. . . . On December 6, 2002, the District Court reduced the punitive damages from $5 billion to $4 billion. . . .page 4-47Was Exxon required to accrue a liability after it lost the case in the district court in 1996?In October 2007, the U.S. Supreme Court agreed to decide whether Exxon should be required to pay $2.5 billion in punitive damages to oil spill victims.Explain how the Court’s willingness to hear the Exxon appeal affects the company’s accounting for this contingent liability.Why does Visa Inc. sometimes record litigation accruals (loss contingency provisions) at the present value rather than the full amount to be paid?Explain the accounting purpose behind the $11 million item labeled “Interest accretion on settled matters” recorded in 2011.Explain why Visa Inc. increased its accrued litigation liability from $425 million to $4,386 million in 2012.”

So much stress and so little time? We’ve got you covered. Get your paper proofread, edited or written from scratch within the tight deadline.