Ludeman Security Systems is a defendant in lawsuits brought against the monitoring service of its installed systems. Damages of $1,000,000 are claimed against Ludeman Security Systems, but the company denies the charges and is vigorously defending itself. In a recent newspaper interview, the president of the company stated that he could not predict the outcome of the lawsuits. Nevertheless, he said management does not believe that any actual liabilities resulting from the lawsuits will significantly affect the company's financial position.

Required

Describe what, if any, disclosure Ludeman Security Systems should provide of this contingent liability. Total liabilities are $4.0 million. If you believe note disclosure is required, write the note to describe the contingency.