Here is what Checkpoint Systems said about its litigation loss contingency in a note to the 2001...
Question:
Here is what Checkpoint Systems said about its litigation loss contingency in a note to the 2001 financial statements released on March 28, 2002: 'The Company is involved in certain legal and regulatory actions, all of which have arisen in the ordinary course of business. . . Management does not believe that the ultimate resolution of such matters will have a material adverse effect on its consolidated results of operations or financial condition.'
The Company is a defendant in a Civil Action No. 99-CV-577, served February 10, 1999, in the United States District Court for the Eastern District of Pennsylvania filed by Plaintiff, ID Security Systems Canada Inc. The suit alleges a variety of antitrust claims; claims related to unfair competition, interference with a contract, and related matters. Plaintiff seeks damages of up to $90 million, before trebling, if an antitrust violation were to be determined. This matter is scheduled for a jury trial commencing April 22, 2002. Management is of the opinion that the claims are baseless both in fact and in law, and intends to vigorously defend the suit. If, however, the final outcome of this litigation results in certain of the Plaintiff's claims being upheld, the potential damages could be material to the Company's consolidated results of operations or financial condition.
Based on the information provided in this note, does it appear as though Checkpoint Systems has already recognized a loss contingency related to this lawsuit? Why or why not?
Contingency:
Contingency refers to a liability that occurs due to an uncertain situation. The management uses different methods to reduce the losses and damages which may arise due to contingent liability. Insurance is one such method used.
Answer and Explanation: 1
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View this answerCheckpoint Systems is of the opinion that in case they lose this lawsuit, then they will incur huge losses and it will impact their financial...
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Accounting for Contingencies & Environmental Liabilities
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Chapter 8 / Lesson 4
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Contingencies and environmental liabilities must be taken into consideration by companies to protect their investments and future. Explore the key concepts of gain contingencies and various types of liabilities that are accounted for.
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