Xenon, a major defense contractor, was faced with huge liabilities and feared violation of debt covenants. Therefore, Xenon declared Chapter 11 bankruptcy protection. Under Chapter 11, a company continues to operate but is protected from creditors while it tries to work out a reorganization plan. At that time the company's management chose to take several significant charges under bankruptcy proceedings, including a $1 million liability not required by GAAP, but that better reflected its commitments to employees.
Required:
Why would Xenon's management have chosen to take these charges at this time?

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The Answer of Xenon, a major defense contractor, was faced with huge liabilities and feared violation of debt covenants. Therefore, Xenon declared Chapter 11 bankruptcy protection. Under Chapter 11, a company continues to operate but is protected from creditors while it tries to work out a reorganization plan. At that time the company's management chose to take several significant charges under bankruptcy proceedings, including a $1 million liability not required by GAAP, but that better reflected its commitments to employees.
Required:
Why would Xenon's management have chosen to take these charges at this time?

Xenon, a Major Defense Contractor, Was Faced with Huge Liabilities