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Response to Client Request II Recently your company was named as defendant in lawsuit involving a patent pending held by your company. Due to the concern of losing the lawsuit your company has asked that our firm research and identify the impacts to your company’s financial statement if a loss of lawsuit should occur. Based on the information provided by your company our firm has prepared the following memo which will outline the current Financial Accounting Standards Board (FASB) practice and thought related to: contingencies, troubled debt restructuring, and impairment. Contingencies
It becomes a necessity for your company to report a loss contingency when the likelihood of an event resulting in an asset's impairment or an
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This arrangement is known as a trouble debt restructuring. According to FASB ASC 470-60-20, “a restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.” According to, FASB ASC 470-60-15-9, a troubled debt restructuring may include, but is not necessarily limited to, one or a combination of the following:
a. Transfer from the debtor to the creditor of receivables from third parties, real estate, or other assets to satisfy fully or partially a debt (including a transfer resulting from foreclosure or repossession) 

b. Issuance or other granting of an equity interest to the creditor by the debtor to satisfy fully or partially a debt unless the equity interest is granted pursuant to existing terms for converting the debt into an equity interest 

c. Modification of terms of a debt, such as one or a combination of any of the following: 
 1. Reduction (absolute or contingent) of the stated interest rate for the remaining original life of the debt 
 2. Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk 
 3. Reduction (absolute or contingent) of the face amount or maturity amount of the debt as stated in the instrument or other agreement 
 4. Reduction

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