A lawsuit has been filed against your client.If, in the opinion of legal counsel, the likelihood your client will lose the lawsuit is remote, no financial statement accrual or disclosure of the potential loss is required.

Question

Quizplus · Accepted Answer

If legal counsel believes that the likelihood of the client losing the lawsuit is remote, then no financial statement accrual or disclosure is required. This is in line with the accounting principle of materiality, where only significant or material losses need to be disclosed or accrued.

A Lawsuit Has Been Filed Against Your Client