Give the accounting reviewer a usable litigation assessment

A legal case can be unresolved while still requiring an accounting conclusion. Give the reviewer the claim, relevant entity, alleged events, reporting date and current procedural position. Distinguish the amount demanded by the other party from counsel's assessment of possible outcomes. Neither an opening demand nor a settlement offer should silently become the accounting estimate.

For IFRS reporting, IAS 37 distinguishes provisions from contingent liabilities using the obligation, likelihood and measurement requirements. Have the accountant apply those requirements to evidence from counsel and management. The finance team should not translate a lawyer's informal phrase into a probability category without confirming what the assessment means.

Coordinate the information request with the company's legal lead. Ask which events occurred before the reporting date, which outcomes remain possible and what facts could materially change the assessment. Set a response date that permits accounting review before statement authorization. Avoid circulating privileged case material more widely than the legal team approves.

Give counsel the accounting questions in understandable terms without asking counsel to make the financial-reporting decision. If the response cannot quantify an outcome, preserve that limitation and ask what supporting information is available. A missing range is a matter for review, not permission for finance to invent a midpoint or record zero automatically.

Maintain separate records for the potential claim settlement, services already received from lawyers and possible third-party recovery. They arise from different facts and can have different recognition requirements. Reconcile billed and unbilled professional work using the legal-fee process, so those costs are not omitted merely because the underlying litigation is uncertain.

Where insurance or an indemnity may cover the claim, provide the coverage terms, exclusions and insurer correspondence to the accountant. The expected recovery should receive its own assessment. Netting a hoped-for reimbursement against the claimant's demand in the working schedule would conceal both exposures and make the review harder to explain.

Retain the accounting conclusion, supporting facts, material limitations and any required disclosure decision. IAS 37 includes disclosure requirements for contingent liabilities unless the possibility of an outflow is remote. The reviewer should consider the applicable requirements and any sensitive circumstances; no recognition entry does not automatically mean no financial-statement disclosure.

A hypothetical claim may have several plausible settlement outcomes and no agreed payment date. Preserve the range and the basis supplied by the appropriate adviser. A budget reserve selected by management for cash planning is a different number and should be labeled separately when it appears beside the financial-reporting assessment.

Ask the legal lead to report new judgments, settlements, material correspondence or changed assessments through the statement-authorization process. Give the accountant the dates and underlying facts so subsequent-event treatment can be evaluated. Keep earlier conclusions available; replacing them with the latest legal update would remove the evidence explaining how the reported judgment was reached.