Show me the steps to solve Background:

Teva Pharmaceutical$$s U$.$S$.$ subsidiary was indicted in August $2020$ on price$-$fixing charges by the Justice Department. Teva is one of the world$$s largest generic drugmakers, with sales totaling nearly $$17$ billion last year.

The indictment of Teva includes three felony counts, with prosecutors alleging the company engaged in three separate conspiracies of price fixing, bid$-$rigging and related collusive activities on a range of drugs. Each of the charges carries a statutory maximum penalty of $$100$ million, but the maximum fine may be increased to twice the gain derived from the alleged crime or twice the loss suffered by victims.

The indictment alleged Teva and co$-$conspirators communicated regularly to increase and maintain the prices for generic drugs and effectively allocated customers by agreeing in advance who would win bids for business.

Court papers indicated that prosecutors have cooperating witnesses from inside multiple generic$-$drug manufacturers,$$including Teva.

Required:

$1.$ Based on the information available, what should be accrued and$/$or disclosed $($if anything$)$ in TEVA$$s next financial statement filing?

$2.$ If you were in TEVA$$s financial reporting group and responsible for Commitments & Contingencies disclosures, what other information would you request from your internal sources?

Solution:

$1.$ Accrue$/$disclose$?$

$$ This indictment does not appear to meet the probable threshold, so NO ACCRUAL

$$ Potential financial penalties are material, so disclosure of the matter would be required.

$2.$ Other info?

$$ Company$$s assessment of potential loss $($probable$,$ reasonably possible, remote$)$

$$ Company$$s estimate of range of potential loss

$$ Whether company plans to appeal or settle

$$ Expected timeline for potential resolution