Accounting Treatment of the Lawsuits Filed Against Latinum Memorandum

Published: 2021-07-06 23:14:37
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Date: April 14, 2018To: Tess La (CFO), Latinum Star CorporationFrom: staff accountantRE: Accounting treatment of the lawsuits filed against LatinumFirstly, I am obliged to you for giving me this opportunity. As requested, I have gathered all the facts and figures related to this case. As in past such claims for made against the company and just in one case court ordered against the company. According to findings, claim for these two cases are more than the actual loss is. The claim made by the plaintiff in 2016 was less than 50% of the real suit. The other claim made in 2017 was of $250 million. But the amount of loss is not reasonably calculated, and reasons for such loss occur are still unknown.Recommendations:According to IAS-37, provisions for one-off events like the settlement of claims should be estimated reasonably [FASB, 250-10-50-1]. The amount refers to provision is the best estimate of the amount paid for the arrangement of the case. Record an accrual when the loss is probable and can reasonably estimate [FASB, 250-10-50-1]. If no estimation has made about the accrued damage, the minimum amount should be recorded (FASB issued ASU 2017-01). Disclose the nature of accumulated loss in your financial statements (ASC450-20). So the for the claim of 2016, made a provision and mentioned it in the financial report of 2017. The accrued amount for this provision should be estimated less than 50% of the claim because of facts are given. The claim made during October 2017 should also be mentioned in the year-end statement [350-30-35-18D].Conclusion:As the accountant of the company, I study these two cases. I infer from the information given is that it is our contingent liability (ASC Para. 470-49-25-2). And we have to mention it in our statement ended on December 31, 2017.Work cited“FASB issued ASU 2017-01.” Business Combinations (Topic 805), Clarifying the Definition of a Business (2017): 2017-01.

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