Professional Documents
Culture Documents
to accompany
Financial
Accounting:
Recording, Analysis
and Decision Making
Fifth Edition
Prepared by
Chrisann Palm
Brief
Learning Objectives Questions Exercises Exercises Problems
1. Explain the differences 1
between current and non-
current liabilities.
ANSWERS TO QUESTIONS
1. While this is generally true, more precisely a current liability is a debt that can
reasonably be expected to be paid within one year or the operating cycle,
whichever is longer.
3. No, Nikki is not right. The market price on any note is a function of three factors:
(1) the dollar amounts to be received by the investor (interest and principal), (2)
the length of time until the amounts are received (interest payment dates and
maturity date), and (3) the market interest rate.
5. A provision is a liability for which the amount or timing of the future sacrifice is
uncertain (AASB 137 para 10). It requires estimation. For example, a provision
for long service leave requires estimation of the proportion of employees who will
stay with the entity long enough to receive long service leave entitlements. The
amount of the future sacrifice of other liabilities, such as trade creditors and
mortgages, is quantified by an invoice or contractual arrangement.
6. A provision is a liability for which the amount or timing of the future sacrifice is
uncertain (AASB 137 para 10). It requires estimation for recognition as a liability.
An example is a provision for warranty claims. A contingent liability is not
recognised because they are not probable or are unable to be measured reliably,
or both. A liability may be classified as a contingent liability because it is so
uncertain that it cannot be measured reliably, or because it does not satisfy the
probability criterion, or if it is dependent upon the occurrence of a future
uncertain event outside the control of the entity. An example of a contingent
liability is an unresolved lawsuit brought against the company. It is contingent
upon the outcome of the court case.
7. Ms Dwyer is incorrect. The obligation for a warranty arises when the sale is
made. The warranty contract commences at that point in time. The sacrifice of
economic benefits arises when the company honours the customer’s warranty
claim. This is similar to having an obligation to pay employees. The obligation
arises when the employee performs the service but the sacrifice of economic
benefits, that is, the payment, is usually made in the following week.
9. Many financially healthy companies have current ratios below 2:0. In order to
reduce costs, many companies today keep low amounts of inventory on hand.
Consequently, liquidity ratios are generally lower than they used to be.
Another measure that could be checked is the quick ratio. This ratio is a measure
of a company’s immediate short-term liquidity and inventory is not included in this
calculation. Another measure of liquidity is working capital.
10. A finance lease is a lease in which substantially all the risks and rewards of
ownership of the leased assets are transferred from the lessor to the lessee in
exchange for a series of payments over the lease term. If substantially all the
risks and rewards of ownership are not transferred, the lease is classified as an
operating lease.
(b) Part of the mortgage payable is a current maturity of long-term debt. This amount
should be reported as a current liability.
(c) Interest payable is a current liability, assuming it is due for payment within the next
12 months.
(d) Accounts payable is a current liability because it is due for payment within the next
12 months.
SOLUTIONS TO EXERCISES
EXERCISE 9.1
EXERCISE 9.2
Transfield Pty Ltd
EXERCISE 9.3
Fairy Wren Ltd
EXERCISE 9.4
EXERCISE 9.5
(b) The current portion of the mortgage liability is $53,014 ($81,994 - $28,980).
(c) The non-current portion is $28,980. This is the loan balance at 30 June 2017.
EXERCISE 9.6
(b) The carrying amount of the mortgage liability after the above entry is $212,434.
(c) The current portion of the mortgage liability is $99,884 ($212,434 - $112,550)
EXERCISE 9.7
a. An unquantifiable liability for restoring a polluted river - Contingent
liabilities
b. Accounts payable – Other liabilities
c. Wages payable – Other liabilities
d. Obligation for unexpired warranty costs - Provisions
e. Trade creditors – Other liabilities
f. Obligations for employees’ long service leave - Provisions
g. Accrued interest liability – Other liabilities
h. Mortgage loan – Other liabilities
i. Guarantee for another’s loan, which will be payable if the other party
defaults – Contingent liabilities unless, at end of reporting period, it is
probable that the other party will default. If so, the guarantee should be
recognised as a provision (settlement date is uncertain).
EXERCISE 9.8
Olden Motor vehicles Ltd
(a)
Summary entry for claims during the year ended 30 June 2013
Warranty Provision $65,000
Inventory $30,000
Wages Payable 35,000
(To record motor vehicle repairs under warranty)
(b) Entities offer warranties because there is a statutory obligation to ensure that the
goods or services are of a satisfactory standard. In order to gain consumer
confidence and satisfaction and perhaps to increase sales, entities often offer a
warranty period greater than that required by law.
EXERCISE 9.9
Benson Builder Pty Ltd
Summary entry for claims during the year ended 31 December, 2016
Warranty Provision $85,000
Wages Payable $85,000
(To record work performed under warranty)
EXERCISE 9.10
(a)
($ in thousands) 2013
1, Working capital
422 27589 588 = 332 687
Current assets Current liabilities
2. Current ratio
422 275
Current assets
89 588 = 4.71:1
Current liabilities
3. Quick ratio
313 157+0 +6 858
Cash+ Marketable securities + Net receivables
89 588 = 3.57:1
Current liabilities
4. Debt to total assets ratio
261 648
Total liabilities
1 562 014 = 0.17:1
Total assets
5. Times interest earned
Profit before income tax + Interest expense* 245 956 + 6 988
Interest expense 6 988 = 36.20
(b) Financial statement users are not only interested in a company’s trends, but also how
the entity has performed relative to its competitors. Ratios vary from industry to
industry. A positive trend in the debt to asset ratio gains more meaning if the
company’s debt to asset ratio compares favorably in comparison to competitors and
entities in similar industries.
EXERCISE 9.11
Speedy Delivery Ltd
30 June Speedy Delivery Ltd is renting a truck from Fast Trucks Ltd under an
operating lease. The journal entry is to record accrual of lease expense for the period ending
30 June.
31 August This entry records the payment made by Speedy Delivery Ltd to Fast Trucks
Ltd on 31 August. Part of the payment is for the lease accrued to 30 June and the rest is for
lease due in the current accounting period.
30 June This journal entry is for Fast Trucks to record accrual of operating lease
revenue earned from Speedy Deliver Ltd up to 30 June.
31 August This journal entry is for Fast Trucks to record the receipt from Speedy
Delivery Ltd of operating lease revenue. Part of the receipt is for lease accrued to 30 June
and the rest is for lease due in the current accounting period.
EXERCISE 9.12
Sunny Nursery Ltd (lessee)
30 June Gardening tools lease expense $400
Gardening tools lease payable $400
EXERCISE 9.13
SOLUTIONS TO PROBLEM
SET A
(b)
Notes Payable
$ $
1/12 16,000 1/9 16,000
1/10 10,000
Clos. Bal. 28,000 1/11 18,000
44,000 44,000
Op. Bal. 28,000
Interest Payable
$ $
1/12 360 30/9 120
31/10 220
30/11 430
Clos. Bal. 720 31/12 310
1,080 1,080
Op. Bal. 720
Interest Expense
$ $
30/9 120 Closing
31/10 220 Entry to
30/11 430 P/L summary
31/12 310 1,080
1,080 1,080
Note: The general ledger account Interest Expense will be closed to Income Summary at the
end of each accounting period.
(e) The advantage of using notes payable for purchasing inventory is that the purchaser
will probably have a longer period of time to pay for the inventory than under the
normal credit terms for accounts payable.
The disadvantage is that interest will have to be paid on the notes whereas accounts
payable is usually interest free. In fact, suppliers often offer a discount for early
payment. That would not be available in a notes payable scenario.
.
(d) Examples of other costs employers might incur in relation to their employees include
obligations for sick leave, annual leave, union dues, and charitable contributions.
(a) 2015
Jan. 1 Cash at Bank ........................................... $1,000,000*
Debentures Payable ................................. $1,000,000
(c) 2016
Dec. 31 Debentures Payable ................................. $1,000,000
Loss on Redemption of Debentures......... 40,000*
Cash at Bank ($1,000,000 X 104%)………………. $1,040,000
(c) Interest expense will be less than $16,000 in the next month because the
opening balance of each mortgage liability, on which the interest is calculated,
will be lower.
(c) Holding product quality constant (no change in suppliers), the Warranty Provision is
likely to be understated at $1,200. In the previous year, a provision of $1,200 was
demonstrated to be inadequate: the provision account had a debit balance prior to
adjusting entries on 30 June 2017. Furthermore, the current estimate does not
reflect the increased sales volume. An increase in the number of watches sold
during the year (indicated by the increase in sales revenue in the absence of an
increase in prices) suggests that there will be additional warranty claims in the
coming year.
(a)
Telco Ltd
Telecom Telco
New Zealand Ltd Ltd
2013 2013
($ in NZ millions) ($ in millions)
1. Current ratio
838 10 085
Current assets
1 086 = 0.77:1 8 680 = 1.16:1
Current liabilities
2. Quick ratio
118+348 5 530+23 +4 170
Cash+ Marketable securities + Net rec.
1 086 = 0.43:1 8 680 = 1.12:1
Current liabilities
3. Debt to total assets ratio
2 080 25 400
Total liabilities
3 493 = 0.60:1 39 360 = 0.65:1
Total assets
4. Times interest earned
341 + 74 6 230 + 1 115
Profit before income tax + Interest expense*
74 = 5.61 1 115 = 6.59
Interest expense
(b) Liquidity can be measured using the current and quick ratios. In 2013 Telco Ltd
outperformed Telecom New Zealand in both measures. Telco Ltd has a higher debt
to total assets ratio than Telecom New Zealand, indicating a larger proportion of
assets financed by creditors, however it also has higher interest coverage than
Telecom New Zealand. In summary, Telco Ltd appears to be more liquid and solvent
than Telecom New Zealand.
(a)
1. Working capital
29 600 - 15 390 = 14 210
Current assets Current liabilities
2. Current ratio
29 600
Current assets
15 390 = 1.92 :1
Current liabilities
3. Quick ratio
6 207+3 400+10 840
Cash+ Marketable securities + Net receivables
15 390 = 1.33:1
Current liabilities
4. Debt to total assets ratio
125 295
Total liabilities
357 875= 0.35:1
Total assets
5. Times interest earned
246 950 + 11 440
Profit before income tax + Interest expense*
11 440 = 22.59
Interest expense
(b) Bayside Ltd’s working capital indicates a positive balance of 14 210. Its current ratio
appears to be adequate with $1.92 of current assets to cover each $1 of current
liabilities; it still falls below the rule of thumb of 2:1. As measure of liquidity risk, the
current ratio has certain limitations as it does not take into account the composition of
current assets. The quick ratio compensates for this by including only the most liquid
current assets in its numerator. The quick ratio of 1.33 is greater than the rule of
thumb of 1:1; this is a good result for Bayside Ltd. As the working capital also is
positive, all three liquidity calculations indicate that Bayside Ltd is likely to be able to
meet its short term debts. The Debt to total assets ratio shows that only 35% of its
assets are funded by creditors, the times interest earned ratio of 22.29 times is much
greater than the general rule of thumb of 3 to 4 times, which is the minimum level
creditors like to see. These ratios suggest that Bayside Ltd is in a strong financial
position and not facing any solvency issues. Even though it appears from the
calculations in part (a) that Bayside Ltd is quite capable of meeting its long and short
term debts, ratios should always be compared with industry averages.
(b)
2015
30 Jun. Interest Expense $24,000
Loan Payable 31,480
Cash at Bank $55,480
(To record the annual loan payment)
2016
30 Jun. Interest Expense $20,222
Loan Payable 35,258
Cash at Bank $55,480
(To record the annual loan payment)
(c)
Current Liabilities
Current portion of long term loan $39,488
Non-Current Liabilities
Loan payable $93,774
Duncan Ltd
Balance
Principal lease
Lease Interest 8% reduction obligation
Date Payment $ $ $ $
01.07.2015 100,000
30.6.2016 38,803 8,000 30,803 69,197
30.6.2017 38,803 5,536 33,267 35,930
30.6.2018 38,803 2,875* 35,929 0
*Rounding error $1 adjusted against interest
(b)
2016
(c)
Statement of Financial Position (Extract)
As at 30 June 2016
Non-current assets
Lease asset $100,000
Less: Accumulated amortisation ( 33,333)
66,667
Current liabilities
Lease liability $33,267
Non-current liabilities
Lease liability 35,930
SOLUTIONS TO PROBLEM
SET B
(b)
Notes Payable
$ $
1/6 8,000 1/3 8,000
1/4 20,000
Clos. Bal. 35,000 1/5 15,000
43,000 43,000
Op. Bal. 35,000
Interest Payable
$ $
1/12 180 31/3 60
30/4 260
31/5 335
Clos. Bal. 750 30/6 275
930 930
Op. Bal. 750
Interest Expense
$ $
31/3 60 Closing
30/4 260 Entry to
31/5 335 P/L summary
30/6 275 930
930 930
(e) The advantage of using notes payable for purchasing inventory is that the purchaser
will probably have a longer period of time to pay for the inventory than under the
normal credit terms for accounts payable.
The disadvantage is that interest will have to be paid on the notes whereas accounts
payable is usually interest free. In fact, suppliers often offer a discount for early
payment. That would not be available in a notes payable scenario.
(d) Examples of other costs employers might incur in relation to their employees include
obligations for sick leave, annual leave, union dues, and charitable contributions.
2016
(a) Jan. 1 Interest Payable................................................... $60,000
Cash at Bank ............................................ $60,000
2017
(c) Jul 1 Notes Payable ..................................................... $30,000
Loss on Redemption of Notes................................ 900
Cash at Bank ($30,000 X 103%) .......................... $30,900
(a) 2015
Jul. 1 Cash at Bank ................................................. $4,000,000*
Debentures Payable ................................. $4,000,000
2015/16
(b) Dec. 31 Interest Expense............................................... $180,000*
Cash at Bank ............................................ $180,000
(c) 2017
Dec. 31 Debentures Payable .................................... $4,000,000
Loss on Redemption of Debenture ................ 80,000
Cash at Bank ($4,000,000 X 102%) ..................... $4,080,000
(c) Interest expense will be less than $4,375 in the next month because the
opening balance of each mortgage liability, on which interest is calculated, will
be lower.
(c) Holding product quality constant (no change in suppliers),the Warranty Provision is
likely to be understated at $2,400. In the previous year, a provision of $2,400 was
demonstrated to be inadequate: the provision account had a debit balance prior to
adjusting entries on 30 June 2016. Furthermore, the current estimate does not
reflect the increased sales volume. An increase in the number of car repairs and
service during the year (indicated by the increase in revenue from car repairs in the
absence of an increase in prices) suggests that there will be additional warranty
claims in the coming year.
(a)
(To adjust the liability for Warranty Provision account to total estimated liability for contracts
outstanding at balance date).
Omnicom Ltd
(a)
Telecom Omnicom
New Zealand Ltd Ltd
2013 2013
($ in NZ millions) ($ in millions)
1. Current ratio
838 501 581
Current assets
1 086 = 0.77:1 175 896 = 2.85:1
Current liabilities
2. Quick ratio
118+348
Cash+ Marketable securities + Net Rec. 61 086+10 241+175 272
1 086 = 0.43:1
Current liabilities 175 896 = 1.40:1
3. Debt to total assets ratio
2 080 392 638
Total liabilities
3 493 = 0.60:1 982 180 = 0.40
Total assets
4. Times interest earned
341 + 74 165 877 +15 700
Profit before income tax + Interest expense*
74 = 5.61 15 700 = 10.57
Interest expense
b) Liquidity can be measured using the current and quick ratios. In 2013 Omnicom Ltd
outperformed Telecom New Zealand in both measures. Omnicom Ltd also has a
much lower debt to total assets ratio than Telecom New Zealand, indicating a smaller
proportion of assets is financed by creditors. Omnicom Ltd also has a much higher
interest coverage than Telecom New Zealand. In summary, Omnicom Ltd appears to
be more liquid and solvent than Telecom New Zealand.
(a)
2016 2015
Working capital
5 450 - 7 120 =- 1 670 4 650 - 5 760= -1110
Current assets Current liabilities
Current ratio
5 450 4 650
Current assets
7 120 = 0.77:1 5 760 = 0.81:1
Current liabilities
Quick ratio
2 860 3 145
Cash+ Marketable securities + Net Rec.
7 120 = 0.40:1 5 760 = 0.55:1
Current liabilities
Debt to total assets ratio
25 620 21 960
Total liabilities
32 700 = 0.78:1 29 750 = 0.74:1
Total assets
Times interest earned
2 710 + 450 2 670 + 390
Profit before income tax + Interest expense*
450 = 7.02 390 = 7.85
Interest expense
(b) In 2016, working capital was a larger negative amount, and both the current ratio
and the quick ratio declined. In both years the current and quick ratios were both
well below 1.0 and should be monitored closely to avoid future liquidity problems.
The debt to asset and times interest earned ratios measure solvency. The
reliance on debt financed increased slightly from 74% to 78% and the times
interest earned ratio dropped from 7.85 times to 7.02 times in 2016. In summary,
Matrix Ltd’s liquidity levels dropped significantly but there was relatively little
change in its solvency.
(b)
2016
30 Jun. Interest Expense $10,000
Loan Payable 16,380
Cash at Bank $26,380
(To record the annual loan payment)
2017
30 Jun. Interest Expense $8,362
Loan Payable 18,018
Cash at Bank $26,380
(To record the annual loan payment)
(c)
Current Liabilities
Current portion of long term loan $19,820
Non-Current Liabilities
Loan payable $45,782
Non-current liabilities
Lease liability 35,165
(d) working capital, current ratio, quick ratio, debt to total assets ratio and times interest earned for 2013.
($ in thousands) 2013
Working capital
60,383 - 51,304 = 9 079
Current assets Current liabilities
Current ratio
60,383
Current assets
51,304 = 1.18:1
Current liabilities
Quick ratio
Cash+ Marketable securities + Net receivables 18 691+0 +23 597*
Current liabilities 51,304 = 0.82:1
Debt to total assets ratio
87,169
Total liabilities
189,751 = 0.46:1
Total assets
Times interest earned
40,765 + 405
Profit before income tax + Interest expense**
405 = 101.65
Interest expense
**referred as finance costs in Domino’s Pizza Enterprises Ltd’s Statement of profit or loss
(a)
2013
Current ratio
100 325 48 545
Current assets
49 647 = 2.02:1 28 478 = 1.70:1
Current liabilities
Quick ratio
18 993 + 0 + 2 597 26 441 + 852 + 6 397
Cash+ Marketable securities + Net rec.
49 647 = 0.43:1 28 478 = 1.18:1
Current liabilities
Debt to total assets ratio
76 316 37 830
Total liabilities
184 461 = 0.41:1 74 164 = 0.51:1
Total assets
Times interest earned
17 612 + 1 088 22 865 + 252
Profit before income tax + Interest expense*
1 088 = 17.19 252 = 91.73
Interest expense
(b) Both entities have positive working capital. Fantastic Holdings Ltd has a significantly
higher current ratio than Nick Scali Ltd, however in both cases the current ratios
appear to be comfortably greater than 1:1. Fantastic Holdings’ quick ratio of 0.43 is
well below 1:1 due to the large proportion of inventory in its current assets (74%). In
contrast, Nick Scali’s quick ratio of 1.18 is much higher as it has a relatively low
proportion of inventory in its current assets (30%).
Fantastic Holdings’ debt to total assets ratios of 41% is much lower than Nick Scali’s
51% however Nick Scali Ltd’s times interest earned is substantially higher than
Fantastic Holdings’. These figures indicate that both companies are highly solvent.
Drawing on note 18 to the 2014 financial statements, Telstra has borrowings in the following
foreign currencies:
Swiss francs
Euro
United States dollars
New Zealand dollars
Swiss francs
Hong Kong dollars
Japanese yen
The major risk involved in off-shore borrowing is that the Australian dollar (or New Zealand
dollar for a New Zealand company) might devalue against the currency in which the entity
has the off-shore loan. This would mean that the company would have to repay more in
terms of its local currency than it had originally borrowed. The extra cost resulting from local
currency devaluation would also result in greater interest payments in the local currency.
For example, if the Australian and New Zealand dollars devalued against the US dollar, it
would take more Australian and New Zealand dollars to repay US loans borrowed by
Australian and New Zealand companies, such as Telstra and Telecom New Zealand.
(b) Moody’s takes the view that most fixed-income market participants are long-term
investors and are, therefore, more concerned about the long-terms prospects of a
corporation or investment product. Accordingly, Moody’s focuses on assessing the
ability of an entity to meet its credit obligations over the long term rather than on
temporary fluctuations in prices and returns.
Moody’s long term view is, generally a time horizon of five-to-ten years, set to capture
at least one full economic cycle. They focus on the risks specific to each borrower’s
industry, country and region within the long-term horizon.
CRITICAL THINKING
Mall Ltd
2018
The early redemption of the 10%, 5-year debentures results in recognising an increase
in profit of $144,000 that increases current year profit by the after-tax effect of the
gain. The amount of the liabilities on the balance sheet will be lowered by the issue of
the new debentures and retirement of the 5-year debentures.
1. The annual cash flow of the company as it relates to debentures payable will be
adversely affected as follows:
2. The amount of interest expense shown on the income statement will be higher
as a result of the decision to issue new debentures.
These comparisons hold for only the 3-year remaining life of the 10%, 5-year
debentures. There will of course be a cash saving on the repayment of the
principal five years later but the company will be committed to a higher interest
rate for five years.
The company must contemplate either redemption of the debentures at maturity,
1 January 2021, or refinancing of that issue at that time and consider what
interest rates will be in 2021 in evaluating a redemption and issue in 2018.
Sincerely,
From: I. M. Student
The revenue from the research contract, and corresponding expenses, associated with the
research contract should be recognised by reference to the stage of completion when the
outcome can be measured reliably (AASB 118). No revenue is recognised on entering into
the contract because at that time no work has been performed. The performance of services
in relation to the research contract differs from the timing of the cash flows of the contract.
Recognising revenue by reference to the stage of completion would result in 50% of the
revenue being recognised in year ended 30 June 2016, when half of the research work is to
be performed. Of the $600,000 received that year, $500,000 should be accounted for as
revenue when 50% of the research is complete. The other $100,000 is a liability for revenue
received in advance.
The remaining 50% of the revenue would be recognised in the year ended 30 June 2017,
when the remaining half of the research is to be performed. It is not necessary to delay the
recognition of revenue until the cash is received unless there is uncertainty that it will flow to
the entity.
As stated above the recognition of revenue is subject to the outcome being able to be
measured reliably. The outcome of a transaction involving the performance of services is
considered to be able to be measured reliably if:
The revenue can be measured reliably because the contact has a fixed price. The
recommendations for recognition of revenue in 2016 and 2017 are based on assumptions
that the stage of completion at 30 June 2016 and 30 June 2017 will be 50% and 100%,
respectively. If different levels of completion apply at the time, the actual percentages of
completion should be used, assuming they can be measured reliably. It is also assumed that
it is probable that benefits will flow to the entity (that is, that this is not a loss making
contract). Lastly, it is assumed that the costs incurred on the research contract and expected
future costs can be measured reliably at 30 June 2016 and 30 June 2017 when revenue is
to be recognised.
Signed
(a) The stakeholders in this situation are: shareholders; potential shareholders; creditors;
potential creditors; any users of the financial statements; customers, including any
consumers of the product; and potential customers, including any potential consumers of
the product.
(b) Creditors and potential creditors may be harmed by the non-disclosure because they
may underestimate the financial risk of extending credit to Candy Bars Ltd. Prospective
investors may also be harmed as they may understate the risk attached to future profits,
cash flows and dividends of Candy Bars Ltd and consequently pay too much for the
shares. Existing shareholders may also be harmed because the non-disclosure may
affect their decision to continue investing in the company and if Candy Bar Ltd loses the
case, the value of shares to the shareholders may decline. Some people may have
avoided that potential loss, at least partially, if, with full disclosure, they would have
decided to sell their shares earlier. The stock market as a whole is disadvantaged
because if investors cannot rely on companies to disclose information relevant to the
value of the shares, investing in companies becomes a much riskier activity. This would
be reflected in the cost of capital to companies in general. Customers may be harmed or
disadvantaged. However, annual reports are not generally used by consumers as a
source of product information.
(c) While there are arguments that ethics is a matter of individual judgement, many people
would consider this behaviour as unethical. Users are being misinformed about relevant
information. This can result in some (such as existing shareholders who wish to sell)
obtaining a benefit at the expense of another group (such as future shareholders). One
often hears attempts to use directors’ obligations to act in the interests of shareholders
as justification for unethical behaviour (and in some extreme instances, fraud and
deception). However, this argument is flawed because behaviour that would be unethical
if done by one party (shareholders) cannot become ethical simply because it is done by
that party’s agent (the directors) acting under some duty to put the interests of his
principal above all others. However, even if one did hold to the point of view that
directors’ conduct can be justified on the basis that it is in the interests of shareholders, it
is not clear in the present case that shareholders (present and future) would benefit from
the non-disclosure of the company’s contingent liability for damages caused by one of its
products.