Ivory Fast Delivery Company,an accrual basis taxpayer,frequently has claims for damages to property the company delivered.Often the claim is not filed until a month after the delivery.In the past,approximately 80% of the claims are paid by Ivory.In 2014,claims for $80,000 were filed.The company refused to pay $20,000 of the claims (because they were not valid),and paid $50,000.The remaining $10,000 in claims were processed and paid in January 2015.Also,in January 2015,claims for $8,000 were filed for deliveries made in 2014,and $6,000 was paid on these claims by March 15,2015.Ivory has not elected to use the recurring item exception to economic performance.Under the all-events and economic performance tests,Ivory can accrue as an expense for 2014:

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The all-events test is not satisfied until the customer makes a claim that Ivory acknowledged as a valid claim that it will pay.The economic performance requirement is not satisfied in these circumstances until the claims are paid.Only $50,000 of claims were determined to be valid in 2014.

Ivory Fast Delivery Company,an Accrual Basis Taxpayer,frequently Has Claims for Damages