Question: On December 31 2010 Braino Tech Inc learned that its

On December 31, 2010, Braino Tech., Inc., learned that its competitor had introduced a product making use of an accessory over which Braino Tech. has exclusive patent rights. Braino Tech. planned to file suit and in all likelihood, its attorneys felt, Braino should recover at least $500,000. Braino Tech.'s December 31, 2010 year-end financial statements were issued March 2, 2011. At that date Braino Tech. still planned to file suit, even though it had not yet done so.

Discuss the accounting treatment in regard to the 2010 financial statements of Braino Tech. called for by GAAP concerning the described circumstances.

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