A colleague points out that, in practice, accrual of a loss contingency for unsettled litigation is rare. After all, disclosure that management feels it is probable that the company will lose a specified dollar amount would be welcome ammunition for the opposing legal counsel. He suggests that a loss not be recorded until after the ultimate settlement has been reached. What do you think?

You are chief financial officer of Camp Industries. Camp is the defendant in a $44 million class-action suit. The company’s legal counsel informally advises you that chances are remote that the company will emerge victorious in the lawsuit. Counsel feels the company will probably lose $30 million. You recall that a loss contingency should be accrued if a loss is probable and the amount can reasonably be estimated. A colleague points out that, in practice, accrual of a loss contingency for unsettled litigation is rare. After all, disclosure that management feels it is probable that the company will lose a specified dollar amount would be welcome ammunition for the opposing legal counsel. He suggests that a loss not be recorded until after the ultimate settlement has been reached. What do you think? You may address facts, ethical issues and values, who the stakeholders are and the impact on them, different alternatives, possible consequences, and your recommendation. You do not have to address each of these items, but your post should be substantive enough for others to continue where you leave off. Must be at least a hundred words and no more than 300 with one resource cited.