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Centel Corporation: disclosure in annual report. Is it a liability?

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The following appeared in Centel Corporation's annual report:

"In December, an investor in the Argo group Inc (TAGI) filed suit against a subsidiary of the company for damages from alleged breach of fiduciary duty and negligence related to the bankruptcy of a subsidiary of TAGI. The company cannot predict the ultimate outcome of this action but believes it will not have a material effect on the company's financial position."

Is this a liability? How should it be reported? Why?

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Solution Summary

In a short paragraph, the response explains the disclosure and the impact to the company.

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Yes this is a contingent liability because there is a breach of legal obligation. It should be ...

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Umut Oltulu, MBA
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  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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