Goldberg Financials
The following footnote accompanied this company's financial statements:
Note 7 - Litigation
On December 2, Year 2, the Company was served with a class action complaint filed in federal court in Calgary, Alberta. The complaint, captioned Bradford Haynes vs. The Company, was filed by a shareholder of the Company on behalf of himself and other shareholders who purchased the Company's common shares during the period of March 31, Year 1, through December 31, Year 1. The plaintiff alleges that the Company violated federal securities laws by making untrue statements of material facts and omitting material facts concerning the Company's construction and start-up of its new manufacturing facility in Coaldale, Alberta. Also named as defendants in the complaint are certain officers and directors of the Company. The Plaintiff is seeking an unspecified amount of monetary damages. While this action is in its preliminary stages, management believes that the allegations are without merit and the Company intends to defend the lawsuit vigorously.
-Refer to Goldberg Financials.Should the company record a liability in Year 2 for this litigation? Why or why not?

Question

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The Answer of Goldberg Financials
The following footnote accompanied this company's financial statements:
Note 7 - Litigation
On December 2, Year 2, the Company was served with a class action complaint filed in federal court in Calgary, Alberta. The complaint, captioned Bradford Haynes vs. The Company, was filed by a shareholder of the Company on behalf of himself and other shareholders who purchased the Company's common shares during the period of March 31, Year 1, through December 31, Year 1. The plaintiff alleges that the Company violated federal securities laws by making untrue statements of material facts and omitting material facts concerning the Company's construction and start-up of its new manufacturing facility in Coaldale, Alberta. Also named as defendants in the complaint are certain officers and directors of the Company. The Plaintiff is seeking an unspecified amount of monetary damages. While this action is in its preliminary stages, management believes that the allegations are without merit and the Company intends to defend the lawsuit vigorously.
-Refer to Goldberg Financials.Should the company record a liability in Year 2 for this litigation? Why or why not?

Goldberg Financials The Following Footnote Accompanied This Company's Financial Statements