Reference no: EM13881337

The following events are indicated in note 15 of J. Crew's 10K annual report for the fiscal year ended January 29, 2011, and its 10K was filed on March 21, 2011.

Acquisition
On November 23, 2010, the Company entered into an Agreement and Plan of Merger (the"Merger Agreement") with Chinos Holdings, Inc., a Delaware corporation ("Parent") . . . . At a special meeting of shareholders held in March 1, 2011, our shareholders voted to approve the Acquisition, and Parent acquired us on March 7, 2011 through a reverse subsidiary merger with J. Crew Group, Inc. being the surviving company. . . .Litigation
In connection with the Acquisition, between November 24, 2010 and December 16, 2010, sixteen purported class action complaints were filed against some or all of the following: the Company, certain officers of the Company, members of the Company's Board of Directors, Holdings, the Issuer, TPG, TPG Fund VI and LGP. The plaintiffs in each of these complaints allege, among other things, (1) that certain officers of the Company and members of the Company's Board breached their fiduciary duties to the Company's public stockholders by authorizing the Acquisition for inadequate consideration and pursuant to an inadequate process, and (2) that the Company, TPG and LGP aided and abetted the other defendants' alleged breaches of fiduciary duty. The purported class action complaints sought, among other things, an order enjoining the consummation of the Acquisition or an order rescinding the Acquisition and an award of compensatory damages. Although the Company, the Company's Board, TPG, and LGP have entered into a memorandum of understanding to settle the actions filed in Delaware, they believe that the claims asserted in that action, as well as the claims asserted in New York and Federally, are without merit and intend to defend against the actions vigorously. The Company has notified its insurers of the actions and believes that any and all costs, expenses, and/or losses associated with the lawsuits are covered by its applicable insurance policies. The Company has recorded a reserve for litigation settlement of $10 million in the consolidated financial statements as of and for the fiscal year ended January 29, 2011.

Required:
1. Is the acquisition a subsequent event? What are J. Crew's responsibilities in its financial statements with respect to disclosing it?
2. With respect to litigation,
a. Has J. Crew recorded any journal entry with respect to the litigation associated with the acquisition? If so, prepare the journal entry.
b. Do you believe that there is some amount associated with the litigation that J. Crew considers to be probable and reasonably estimable? What about reasonably possible, or probable but not reasonably estimable? Explain your reasoning.