1. Sherwin-Williams' 114-Year-Old Liability

2. Background
Sherwin-Williams may have to pay damages for lead paint product advertisements dating back to 1904.
It is currently appealing the ruling.

3. Multiple Choice Questions
1. Assume Sherwin-Williams determines that the chance of having to pay damages is very unlikely at roughly a 1% chance of losing the lawsuit. However, if Sherwin-Williams loses the lawsuit, it estimates it will be required to pay $200 million in damages. What amount, if any, should Sherwin-Williams record as a liability on the financial statements?
a. $2 million
b. $198 million
c. $200 million
d. No liability recorded.

4. Multiple Choice Questions
2. Assume Sherwin-Williams determines that the chance of having to pay damages is probable. If Sherwin-Williams loses the lawsuit, it reasonably estimates it will be required to pay $200 million in damages. How should Sherwin-Williams account for this lawsuit?
a. Record a liability
b. Disclose in notes
c. No disclosure
d. Record an asset

5. Discussion Questions
3. 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.
4. 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.