In August 2022, 231 passengers from various Chelsea cruises filed a class action complaint alleging that Chelsea
Question:
In August 2022, 231 passengers from various Chelsea cruises filed a class action complaint alleging that Chelsea had failed to meet the level of care owed to its guests during the previous year. According to the complaint, these passengers all became very ill while on board Chelsea's cruises as a result of poor health and safety standards. The visitors are requesting a total of $2,310,000 in damages. A hearing has been set for mid-March 2023. Chelsea's biggest rival recently settled a comparable class action case for $2,400,000 for 300 visitors. Chelsea denies the charges, and its attorneys have stated that the company is likely to win the case. Chelsea is covered by public indemnity insurance.
Tasks:
(a) Determine whether Chelsea's lawsuit represents a provision or a contingent liability in its financial statements as of December 31, 2022. Explain your explanation using precise paragraph references from the appropriate accounting standard (s).
(b) Determine if Chelsea is obliged to record and/or report anything related to this case in its financial statements as of December 31, 2022. Explain what, if anything, has to be recorded and/or disclosed, and support your argument with explicit paragraph references from the appropriate accounting standard (s).
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts