If a company has recorded a liability for a lawsuit, and the amount of the settlement is more than the provision in the liability, it must consider this an error and retrospectively correct it.

Question

Quizplus · Accepted Answer

A difference between the recorded liability and the actual settlement amount is not considered an error; it is an estimate adjustment and should be accounted for in the period the settlement occurs.

If a Company Has Recorded a Liability for a Lawsuit