How should the company account for the situation

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In January 2020, AeroEngine Co. was advised of possible litigation due to faulty engines that were sold during 2019. The Company's fiscal year-end is December 31, 2019. AeroEngine's attorneys determined it was probable that the company would lose the case, but were unable to estimate the amount of the loss. On March 28, 2021, judgement was rendered against the company in the amount of $50 million plus interest, a total of $50.8 million. AeroEngine does not plan to appeal the judgement. The financial statements are issued on March 14, 2020.

Problem 1: How should the company account for this situation?

Reference no: EM132988356

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