Famous Court Cases

bj_osterhout asked:


When faced with lawsuits, many companies recognize a loss and therefore credit a liability or reserve account for any future losses that may result. For instance, in the famous WORLDCOM case, Citibank, the world’s largest financial services firm, announced that it was setting up reserves or liabilities of $5.6 billion in connection with pending lawsuits related to its relationship with WorldCom. Are these lawsuits contingent liabilities? Using the two criteria established by the FASB for recording a contingency, what conditions must exist for Citibank to record these lawsuits when they have not yet been heard in court?