Beasley Mason Company is a defendant in a lawsuit alleging damages of $3 billion.The litigation is anticipated to continue for several years,but no reasonable estimate can be made at this time regarding ultimate financial responsibility.This situation is an example of:

Question

Quizplus · Accepted Answer

The situation is an example of a loss contingency that should be disclosed in the notes to Beasley's financial statements. Since no reasonable estimate can be made at this time regarding ultimate financial responsibility, the disclosure should include the nature of the contingency, an estimate of the possible loss or range of loss if it can be made, and a statement that it is not possible to reasonably estimate the loss if it cannot be made. No accrual is required since a reasonable estimate cannot be made.

Beasley Mason Company Is a Defendant in a Lawsuit Alleging