Recognition of’ a loss contingency Consider the following hypothetical series of events. While shopping in a Nordstrom store on July 5, 2007, a customer slips on the escalator and falls, sustaining back and neck injuries. On January 15, 2008, the customer sues Nordstrom for $1 million. The case comes to trial on April 30, 2008. The jury renders its verdict on June 15, 2008, and finds Nordstrom liable for negligence. The jury grants a damage award of $400,000 to the customer. Nordstrom, on June 25, 2008, appeals decision to a higher court, which rules on November 1, 2008, that the trial court should retry the case. The trial court retries the case beginning March 21, 2009. Another jury, on April 20, 2009, again finds Nordstrom liable for negligence and awards $500,000. On May 15, 2009, the store pays the 5500.000 judgment. Nordstrom applies U.S. GAAP
a. When, if at all, should Nordstrom recognize a liability from these events? If Nordstrom recognizes a liability, what is the amount? Explain your reasoning.
b. How would your response change if Nordstrom were applying IFRS?