How should Ford treat the contingency resulting from the Ford Mustang Shelby GT350 owners’ class action lawsuit? Original blog posting (April 18, 2017)

Ford Mustang Shelby GT350 Marketed as a track-ready car built to reach & sustain high speeds Class action suit alleging the cars are not track-ready has been filed Claims car slows significantly after about 15 min. of high-speed driving Ford advised the owners to buy transmission & differential coolers at the owner’s expense Transmission and differential coolers are included in the 2017 model 3,991 Shelby 350GTs could be covered by this lawsuit Copyright: <a href='https://www.123rf.com/profile_edaldridge'>edaldridge / 123RF Stock Photo</a>

Question 1 What is a contingent liability?

Question 2 What factors should Ford consider when deciding how do treat the Ford Mustang Shelby GT350 contingent liability?

Question 3 In your opinion, how do you think Ford should handle this contingent liability in its financial reports (accrue, disclose, or do nothing)? Explain.

Question Recap What is a contingent liability? What factors should Ford consider when deciding how do treat the Ford Mustang Shelby GT350 contingent liability? In your opinion, how do you think Ford should handle this contingent liability in its financial reports (accrue, disclose, or do nothing)? Explain.

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/ Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu