Discuss why sherwin-williams should or should not record

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Reference no: EM133299316

Question: Sherwin-Williams, the popular paint manufacturer, is fighting a California court ruling that requires the company to pay hundreds of millions in damages for lead paint advertisements dating back to 1904. The court ruled that Sherwin-Williams should have known that lead paint was dangerous to its customers and should have anticipated the adverse effects it could have on their health.

Sherwin-Williams contends that it is unreasonable for the company to have known the dangers of lead paint in the early 1900s. They argue that research on lead paint was scarce and inconclusive during that time. Further, the company points to the fact that the federal government didn't ban use of lead paint in homes until 1978.

Sherwin-Williams is appealing the California court's ruling and petitioned the supreme court to take up the case.

Required: Answer both Questions

1) Assume Sherwin-Williams determines that the chance of having to pay damages is probable, but estimates the damages could be anywhere from $1 million to $500 million. In other words, the company cannot reasonably estimate damages. Discuss how Sherwin-Williams should alert shareholders to this probable loss.

2)Due to hurricanes affecting parts of Florida and Texas in past years, Sherwin-Williams is considering recording a contingent liability for the possibility of future hurricanes affecting manufacturing facilities in those states. Discuss why Sherwin-Williams should or should not record a contingent liability for these possible future events.

Reference no: EM133299316

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