The Boeing Company, manufacturer of jet aircraft, is the defendant in numerous lawsuits claiming unfair trade practices. Boeing has strong incentives not to disclose these contingent liabilities. However, financial accounting standards require that companies report their contingent liabilities. Required: 1. Why would a company prefer not to disclose its contingent liabilities? 2. Describe how a bank could be harmed if a company seeking a loan did not disclose its contingent liabilities. 3. What is the ethical tightrope that each company must walk when it reports its contingent liabilities?
The Boeing Company, manufacturer of jet aircraft, is the defendant in numerous lawsuits claiming unfair trade practices. Boeing has strong incentives not to disclose these contingent liabilities. However, financial accounting standards require that companies report their contingent liabilities. Required: 1. Why would a company prefer not to disclose its contingent liabilities? 2. Describe how a bank could be harmed if a company seeking a loan did not disclose its contingent liabilities. 3. What is the ethical tightrope that each company must walk when it reports its contingent liabilities?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Case No. 6
The Boeing Company, manufacturer of jet aircraft, is the defendant in
numerous lawsuits claiming unfair trade practices. Boeing has strong
incentives not to disclose these contingent liabilities. However, financial
accounting standards require that companies report their contingent
liabilities.
Required:
1. Why would a company prefer not to disclose its contingent liabilities?
2. Describe how a bank could be harmed if a company seeking a loan did
not disclose its contingent liabilities.
3.
What is the ethical tightrope that each company must walk when it
reports its contingent liabilities?
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