SkillSoft is a leading provider of content resources and complementary technolog
ID: 2421049 • Letter: S
Question
SkillSoft is a leading provider of content resources and complementary technologies for integrated enterprise learning. The company’s fiscal year ends December 31, 2015, and it plans to file its financial statements with the SEC on March, 15, 2016. On March 10, the company issued the following press release ( in part):
NASHUA, N. H., March 10 / PRNewswire- FirstCall/— SkillSoft PLC ( Nasdaq: SKIL), . . . has agreed . . . to settle a lawsuit filed against it and certain of its former and current officers and directors in late 2015 related to the 2013 securities class action lawsuit. This lawsuit included substantially the same claims as those set forth in the previously settled 2013 securities class action lawsuit. Under the terms of the settlement, SkillSoft will pay a total of $ 1.79 million to the plaintiffs prior to March 15, 2016.
Suppose the settlement had occured after march 15th. How should SkillSoft handled the situation?
Treatment on March 10th -
& Journal entry
Treatment if settlement had occurred after March 15th
Required: 1. From an accounting perspective, how should SkillSoft have treated the settlement? 2. Relying on the information provided by the press release, re- create the journal entry SkillSoft recorded for the settlement. 3.Suppose the settlement had occured after march 15th. How should SkillSoft handled the situation?
Treatment on March 10th -
& Journal entry
Treatment if settlement had occurred after March 15th
Explanation / Answer
1) Skillsoft is required to take into consideration all information upto and including the date of issuance of its financial statements. As company is to pay the due to the plaintiff prior to the filling date with the SEC the company have to show this to shareholders.
An enclosure of disclosure note is required in this case.
2) Journal entry
Loss litigation 1.79
To, Liability Litigation 1.79
3) The company still need to recognize the transaction or atleast make a disclosure to the stakeholders.It is clear from the question that Litigation do exist at the date of balance sheet.
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