Walmart Stores, Inc. is sued about once every two hours every day of the year. These allegations range from falls on icy parking lots to injuries sustained in shoppers' stampedes to a murder with a rifle purchased at one of its stores. The company recently disclosed the following in the notes to its financial statements:
The Company is involved in a number of legal proceedings. The Company has made accruals with respect to these matters, where appropriate. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. However, where a liability is reasonably possible and material, such matters have been disclosed.
Instructions
(a) The above states that "the company has made accruals . . . where appropriate." Explain when it would be appropriate for Walmart to accrue a liability as a provision rather than disclose it as a contingent liability.
(b) How might the accrual or disclosure of these legal proceedings change if Walmart were a private company reporting under ASPE?