Respond to the specific questions in each of the two cases, below.
Case A
The following disclosure note appeared in the 31 December 20X5 financial statements of Dridell Corporation, a manufacturer of electronic equipment: Dridell is exposed to liabilities and compliance costs arising from its past and current generation, management, and disposal of hazardous substances and wastes. As of 30 December 20X5, the accruals on the consolidated SFP for environmental matters were $ 27 million. Based on information available as of 31 December 20X5, management believes that the existing accruals are sufficient to satisfy probable and reasonably estimable environmental liabilities related to known environmental matters. Any additional liabilities that may result from these matters, and any additional liabilities that may result in connection with other locations currently under investigation, are not expected to have a material adverse effect on the business, results of operations, financial condition, and liquidity of Dridell. Case B
The following disclosure note is from the 31 December 20X2 financial statements of Zing Limited, a property developer: On 7 January 20X3, the Corporation contracted to acquire 60 residential housing units from a third party for a purchase price of $ 2.8 million, cash. On 24 ­January 20X3, the Company issued 240,000 stock options to senior officers of the company. These options have a three- year vesting period, with one- third vesting on each anniversary date.

For each of these two disclosure notes, explain:
1. What is the purpose of the note?
2. What types of management estimates are implied by this disclosure?
3. What implications might this note have for the financial reporting in future years, if any?

  • CreatedFebruary 17, 2015
  • Files Included
Post your question