Financial accounting Essay Example | Topics and Well Written Essays - 500 words

Financial accounting - Essay exerciseThis contingent on(p) liability has to be explained in detail in the notes section with references to the law suit, failed bid and the estimated trial run date.a. In the light of the information in the article, do you believe that it is appropriate for Santos to utilize a contingent liability note as the vehicle to provide information about the organizations potence liability in relation to the mudflow claims?From the information provided in the article, it is evident that there is a big uncertainness associated with upcoming claims and settlements. It is imperative to note that Santos has already agreed to make a payout of $ US 22.5 million to Minarak in order to protect itself from past, present and future claims. This reduces the possibilities of Santos being held responsible for claims, though the amount paid to Minarak is in truth low compared to the damage caused by the mudflows. The deal has also reduced the potential trys for a third ships company buyer indicating that the company is protected from future claims. As the chances for possible obligations are remote, it is not necessary for Santos to snitch contingent liability.Santos can set aside a certain sun to provide as a relief measure to the affected people of the villages in East Java and establishing new homes for them. Santos can overturn future claims by dealing with the affected directly and providing relief measures. This will reduce the uncertainty regarding the future claims, but at the same time will increase the current obligations. This will reduce the risk for Santos for being taken over by another company. This step also has the added benefit of repairing the companys brand image in the minds of the people and the government of Indonesia. Hence this cost can be recognize as a provision in the financial statement, as the present obligation as a result of an