10-5

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Case 10-5 Danle Corporation Danle Corporation (Danle), a public company, conducts business activities primarily related to the design, development, manufacture, and assembly of passenger cars, recreational and sport-utility vehicles, minivans, and trucks. Danle used asbestos in the manufacturing of brake shoes and gaskets because of its heat resistance. During the past three years, two claims were filed against Danle by automotive mechanics and surviving family members seeking recovery because of their alleged exposure to asbestos. The following information summarizes Danle’s exposure to the two asbestos claims over the past three years. The amount of damages sought in the complaints is considered material to Danle’s financial…show more content…
Note 8 — Litigation Over the past two years, two class-action lawsuits have been filed against Danle by automotive mechanics seeking recovery. The lawsuits allege that the mechanics suffered severe illnesses as a result of exposure to asbestos that was used by Danle in the manufacturing of brake shoes and gaskets. The lawsuits are seeking compensatory and punitive damages. Because it does not believe the asbestos used in the manufacturing of the brake shoes and gaskets led to the mechanics’ illnesses, Danle has retained external legal counsel to vigorously defend the claims made against Danle in the lawsuits. Danle estimates the range of possible loss to be approximately $50 million to $350 million. The recorded reserve balance for these proceedings and exposures as of March 31, 2010, and December 31, 2009, was approximately $50 million and $0, respectively. These reserves represent management’s best estimate of the probable loss, as defined by ASC 450-20, Contingencies: Loss Contingencies (formerly FASB Statement No. 5, Accounting for Contingencies). Second and Third Quarter 2010 No changes in the facts. Year-End 2010 On the basis of developments in the two lawsuits during the year, Danle disclosed the following information within the notes to its consolidated financial statements in Form 10-K for the year ended December 31, 2010. Note 8 —
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