Murchison Technologies

Murchison Technologies
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December 30, 2022
2. Determining the probability range would depend on assessing the issues presented and their 'likelihood' of happening. In this case, the contingency as presented may be considered a "possible contingency." According to Fitzsimons and Thompson (1997), a possible contingency is one that "o not have a more-likely-than-not chance of being realized but is not necessarily considered unlikely either." This is what exactly was presented in this case.  
For example, the management's and the lawyer's assessments noted that the risk of an adverse outcome against Murchison is very low. However, they do not deny that it is possible and even estimate the possible liability at about $150,000 to $200,000. These assessments alone suggest that this is a possible contingent liability. 
However, in contrast to the management's assessment that the claim is "immaterial relative to the December 31, 2008, financial statements", I believe it should still be discussed. The GAAP provides explicitly that while there is no need to place 'possible contingencies' in the books, these must still be discussed in the financial statement notes. Thus, it must still be discussed. 
3. If the assumptions and assessments made by the attorney and management differ, then it is best to reconcile both points before moving toward a specific conclusion. Resolving these differences could be done by checking if any of the issues (i.e., the pote...