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If a company wins a court case and gets a financial settlement, how do you account for that on the financial statement?

Answers

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

Recorded as miscellaneous income when received. No entry until receives as the award is a gain contingency, notrecordable under GAAP. Disclosure of award and progress required [if material], and required for recorded amount when received, if material.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Hmmmm. It depends. In a perfect world you placed a note on your statements regarding the probable outcome of the case, i.e. a Contingency. But based on figures I have seen, less than 50% of companies do that.

Now I am going to assume that settlements are not part of your business, i.e. it is an irregular item counted as an unusual gain. Personally I hate any category termed "Misc." Pet peeve of mine.

You can show it on your income statement but it should be separated from "Income from Continuing Operations." A summary of details should be disclosed in the Notes.

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