Case 13-8:Accounting for a Loss Contingency for a Verdict Overturned on Appeal

ASC 320-10-35-35: “In periods after the recognition of an other-than-temporary impairment loss for debt securities, an entity shall account for the other-than-temporarily impaired debt security as if the debt security had

As discussed above, if indicators of impairment exist for an asset (group) to be held and used, an entity determines whether the sum of the estimated undiscounted future cash flows attributable to the asset (group) in question is less than its carrying amount. If those undiscounted cash flows are less than

A prior period adjustment is a correction, for an accounting error, on the financial statements of a prior year. ASC 250-10-50-7 states that “when financial statements are restated to correct an error, the entity shall disclose that its previously issued financial statements have been restated, along with a description of the nature of the error. The entity also shall disclose …the cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position.” The adjustment to the estimate is not a correction due to an error. Therefore, it should not affect or restate retained earnings or liabilities recorded in prior periods

A loss contingency as per ASC 450-10-20 is “An existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur. The term loss is used for conveniences to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses.” Contingent liabilities depend on the occurrence of one or more future events to confirm the: amount payable, the payee, the date payable, or its existence.

First, Main Line’s maximum and minimum lost profit amounts should not be revised downward. The 3 million dollars represents an estimate of predictable future cash flows from domestic distribution. The deal not being finalized does not in any way change

In accordance with ASC 855-10-25-3, An entity shall not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date but before financial statements are issued or are available to be issued. See paragraph 855-10-55-2 for examples of non-recognized subsequent events.

A corporation cannot use net operating losses between C corporation years and S corporation years, with the only exception that net operating losses from C corporation years can reduce net recognized built-in gains from S corporation years.

* There is cash flow loss that might causes continuing losses associated with the use of the asset

______     2.     A loss incurred from expropriation (the company owned resources in South America which were taken over by a dictator unsympathetic to American business).

25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”

Division 230 applies to the gains and losses made from financial arrangements. More specifically, the general rule is that gains made from financial arrangements are included in assessable income and losses made from financial arrangements that meet the nexus test are deductible.

Upon review this cession, it is unclear how this loss triggers/falls within our 1999 contract period of 09/01/99 – 08/31/00. Could you kindly review with Zurich American Insurance Company (Zurich) and provide clarification how our contract responds to this.

An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is

The entries required to recognise the deferred tax which is included in the profit or loss for the period.

There would still be a net loss in 2006 due to the increase of break-even point, which increased from $7,505 to $8,640.