A lawsuit has been initiated against a federal government agency for alleged dis

Question

A lawsuit has been initiated against a federal government agency for alleged discrimination. The plaintiff in the case has requested damages of $4 million, although the government agency’s legal counsel estimates that the plaintiff may be willing to settle for as little as $2 million; at this point, it is not clear what amount within the range will be paid. The government’s lawyer believes the plaintiff will likely prevail in the lawsuit.

Required: You have been asked to assist in evaluating the accounting by the government agency for this litigation (e.g., should a liability be recorded and, if so, for what amount?

Explanation / Answer

Yes liability should be recorded for the maxmium amount , because even govt lawyer also having estimate that laibiltiy will be come in future , it is just that amount is uncertain as of now . it better and prudent to record liability in the books

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