Norris Company settled a lawsuit in February for an amount that was significantly different from the amount that was originally accrued as an estimate of potential loss. The company's year-end is December 31 and its financial statements are issued in March. This is an example of

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The settlement of the lawsuit in February, after the balance sheet date but before the financial statements were issued, provided further evidence of the company's condition at the balance sheet date. This suggests that the original estimate of potential loss was inaccurate, indicating that the conditions leading to the lawsuit settlement amount existed at the balance sheet date.

Norris Company Settled a Lawsuit in February for an Amount