Wal-Mart was sued nearly 5,000 times in a recent year—about once every twohours every day of the year. Wal-Mart has been sued for everything imaginable—ranging from falls on icy parking lots to injuries sustained in shoppers’ stampedes to a murder with a rifle purchased at Wal-Mart. Wal-Mart does not adhere to the legal strategy many businesses use of “Settle quickly and cut your losses.” Instead, Wal-Mart aggressively fights lawsuits, even when it would be cheaper to settle. The company reported the following in the notes to its financial statements: Exercises 531
Instructions
(a) Explain why Wal-Mart does not have to record these contingent liabilities.
(b) Comment on any implications for analysis of the financial statements.