The following is not meant to be legal or financial advice.
On October 13, 2006, Andrew Cotton presented to attorneys in Redwood City, CA on accruals and loss contingencies.
The fact that a company has insurance for loss contingencies bears on the evaluation whether the loss contingencies are considered material. If the conditions for accrual of a loss contingency are satisfied based on information subsequent to the date of the financial statements, but before issuance of the statements, the charge to income should be recorded in the period that an asset was impaired or a liability was incurred. Events that provide additional evidence with respect to conditions that existed at the date of the balance sheet and affect the estimates inherent in the process of preparing financial statements should be accrued at the balance sheet date.
An unasserted assessment or claim does not need to be disclosed when there has not been any manifestation by a potential claimant of an awareness of a possible claim or assessment unless: (1) it is probable that a claim will be asserted, and (2) there is a reasonable possibility of an unfavorable outcome.
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