Keyword Analysis & Research: pending lawsuit gaap

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Frequently Asked Questions

What is a pending lawsuit?

Pending litigation involves legal claims against the business that may be resolved at a future point in time. The outcome of the lawsuit has yet to be determined but could have negative future impact on the business. Warranties arise from products or services sold to customers that cover certain defects (see (Figure) ).

Should contingent liabilities be reported under GAAP?

Last, GAAP qualifies other contingent liabilities as "low probability." The likelihood of these contingent liabilities actually triggering a cost is very low, and therefore accountants are not required to report them in the financial statements. The accounting rules regarding contingent liabilities are, as you can see above, very subjective.

What does GAAP stand for in accounting?

GAAP simply refers to the generally accepted accounting principles. This is vital as it provides a foundation for approved accounting methods and practices.Since the company was recently served with a lawsuit and in this case, there's litigation, it's necessary to provide a disclosure on financial statements regarding the pending litigation.

What if the company does not provide the information required by GAAP?

The company must provide the disclosures required by GAAP, even if the information is not provided it by their attorney.

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