From the e-Activity(see below), briefly discuss the type of contingencies that Coca Cola isinvolved in and the accounting treatment of such contingencies. Give youropinion on whether the notes to the financial statements disclose the necessaryinformation on the contingencies for interested parties to make an investingdecision. Based on the information disclosed, decide whether you would youinvest in Coca Cola. Justify your rationale.
Suppose management is involved in a situation where the outcome of thesituation is contingent upon certain events to occur; however, management isunsure of the generally accepted accounting principles for reportingcontingencies. You are the senior accountant, and management has tasked you withpreparing a report on contingencies. Distinguish between a gain contingency anda loss contingency, and highlight the accounting treatment for each type ofcontingency. Also, recommend two (2) improvements to the reporting requirementson loss contingencies to FASB.
Go to Reuters Website to read the article titled “Update 1-Overstock toRestate 2008 Results” dated February 4, 2010.
- evaluate and discuss how the under billings should have been accounted forin the original financial statements.
- Should the under billings be treated as gain contingencies? Explain yourposition.
(E Activity)Review financial data on Coca-Cola notes to financial statements, located at http://assets.coca-colacompany.com/9b/d3/b75cdce348fa907295f549d2cc7e/2009_12_Coca-Cola_Item8.pdf,specifically Note 8: Commitments and Contingencies on page 93. Be prepared todiscuss.