1272 Words Jul 12th, 2014 6 Pages
Response to Client Request II Recently your company was named as defendant in lawsuit involving a patent pending held by your company. Due to the concern of losing the lawsuit your company has asked that our firm research and identify the impacts to your company’s financial statement if a loss of lawsuit should occur. Based on the information provided by your company our firm has prepared the following memo which will outline the current Financial Accounting Standards Board (FASB) practice and thought related to: contingencies, troubled debt restructuring, and impairment. Contingencies
It becomes a necessity for your company to report a loss contingency when the likelihood of an event resulting in an asset's impairment or an
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Total future cash payments include related accrued interest, if any, at the time of the restructuring that continues to be payable under the new terms. That is, the effects of changes in the amounts or timing (or both) of future cash payments designated as either interest or face amount shall be reflected in future periods. Interest expense shall be computed in a way such that a constant effective interest rate is applied to the carrying amount of the payable at the beginning of each period between restructuring and maturity. The new effective interest rate shall be the discount rate that equates the present value of the future cash payments specified by the new terms (excluding amounts contingently payable) with the carrying amount of the payable (FASB ASC 470-60-35-5).

Chapter 11 Bankruptcy
Should your company choose to file Chapter 11 bankruptcy, the Chapter 11 Bankruptcy proceedings will frequently reduce all or most of your company’s indebtedness with the approval of your creditors and the court in order to provide an opportunity for your company to have a fresh start. According to FASB ASC 470-60-55-1, such

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