Essay on case 12-07

1370 WordsSep 3, 20146 Pages
Case 12-7 Facts: Rossi Inc.: Asbestos Litigation Liability: The cost of settlement and defensed costs relating to currently pending claims and future claims for losses incurred to date. Liabilities recorded per/as at Dec 31. 2009 2008 2007 Rossi Inc. $962m $1,055m $469m Thompson (External Specialist) $1124m $1,055m Internal Actuarial Specialist $907m, $1,184m, and $1,514m The 2007 claim estimate is projected through 2011. The 2008 and 2009 estimate are projected through 2017. During 2009: The reserve is reduced by payment, but no addition; Higher mesothelioma settlement amounts (Est. 29k vs Act.34K); Higher legal expenses due to: 1. More aggressive approach and use of experts (many + verdicts); 2. martin, Smith, and…show more content…
When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range shall be accrued. ASC 450-20-50-3: Disclosure of the contingency shall be made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred and either of the following conditions exists: a. an accrual is not made for a loss contingency because any of the conditions in 450-20-25-2 are not met. b. an exposure to loss exists in excess of the amount accrued pursuant to the provisions of paragraph 450-20-30-1. ASC 450-20-50-4: The disclosure in the preceding paragraph shall include both of the following: a. the nature of the contingency. b. an estimate of the possible loss or range of loss or a statement that such an estimate can’t be made. Analysis: 1. Review management memo related to asbestos reserves, external specialist report, and internal actuarial specialist report. Then, performed assessment of external specialist’s competence, capabilities and objectivity; and obtained an understanding of the work of the external specialist in accordance with firm policies. Next, auditor should test controls over the asbestos claims. And auditor should test the data and information used by the external specialist for accuracy and completeness. Finally, auditor should use an internal actuarial specialist to
Open Document