Question: On December 31, 2019, Braino Tech Inc. learned that its competitor had introduced a product using an accessory to which Braino has exclusive patent rights.

On December 31, 2019, Braino Tech Inc. learned that its competitor had introduced a product using an accessory to which Braino has exclusive patent rights. Braino planned to file suit and its attorneys estimated that Braino should recover at least $500,000. Braino’s December 31, 2019, year-end financial statements were issued March 2, 2020. At that date, Braino still planned to file suit, even though it had not yet done so.

Required:
Next Level Discuss the accounting treatment in regard to the 2019 financial statements of Braino Tech called for by GAAP concerning the described circumstances. Be sure to conceptually justify this treatment.

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