Pearson, Inc. for 2021 has $50 million in sales with $4.5 million of net income. They...

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Pearson, Inc. for 2021 has $50 million in sales with $4.5 million of net income. They show about $32 million in total assets. During the year the company was involved in two lawsuits. Lawsuit A was filed against Pearson by 3 employees for wrongful termination. They are suing for back wages and other damages totaling about $150,000. Pearson has some documentation to back up the warnings given to the employees but it is incomplete. Pearson's attorney believes that there is about a 60% chance that Pearson will lose but is confident that the amount of the award would be reduced to less than half what is being asked for even if they lose. The second lawsuit was filed by Pearson against a much larger company who Pearson accused of infringing on Pearson's patent. Pearson believes that the company used Pearson's idea to generate nearly $10 million in sales while the company claims to not have copied the idea but rather came up with something similar but with enough difference to be unique. The specialized patent attorneys hired by Pearson for this matter refuse to give an estimate of the likelihood of winning but are working on a commission basis (only get paid if Pearson wins). I Looking at both of the lawsuits - what general principles of accounting would be used to determine what should be communicated to shareholders in the financial statements and footnotes for Pearson for 2021. Describe as carefully as you can how these principles would be applied to show a realistic picture of Pearson's financial situation. Pearson, Inc. for 2021 has $50 million in sales with $4.5 million of net income. They show about $32 million in total assets. During the year the company was involved in two lawsuits. Lawsuit A was filed against Pearson by 3 employees for wrongful termination. They are suing for back wages and other damages totaling about $150,000. Pearson has some documentation to back up the warnings given to the employees but it is incomplete. Pearson's attorney believes that there is about a 60% chance that Pearson will lose but is confident that the amount of the award would be reduced to less than half what is being asked for even if they lose. The second lawsuit was filed by Pearson against a much larger company who Pearson accused of infringing on Pearson's patent. Pearson believes that the company used Pearson's idea to generate nearly $10 million in sales while the company claims to not have copied the idea but rather came up with something similar but with enough difference to be unique. The specialized patent attorneys hired by Pearson for this matter refuse to give an estimate of the likelihood of winning but are working on a commission basis (only get paid if Pearson wins). I Looking at both of the lawsuits - what general principles of accounting would be used to determine what should be communicated to shareholders in the financial statements and footnotes for Pearson for 2021. Describe as carefully as you can how these principles would be applied to show a realistic picture of Pearson's financial situation.

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In order to communicate the impact of the lawsuits to shareholders in the financial statements and footnotes for Pearson in 2021 several general accounting principles ... View the full answer