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Question: Sell-Soft is the defendant in numerous lawsuits claiming unfair trade practices. Sell-Soft has strong incentives not to disclose these contingent liabilities. However, GAAP requires that companies report their contingent liabilities.

Requirements: 1. Why would a company prefer not to disclose its contingent liabilities?

2. Describe how a bank could be harmed if a company seeking a loan did not disclose its contingent liabilities.

3. What ethical tightrope must companies walk when they report contingent liabilities?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92648389

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