Ethics

Company is the defendant in numerous lawsuits claiming unfair trade practices. Sell Soft has a strong incentive not to disclose these contingent liabilities. However, GAAP requires that companies report their contingent liabilities.

Answer 1Businessis to read rivals mind and have the product in the marketbefore the rival with better quality and cheaper rates. A companydiscusses its contingent liabilities among the trusted partners ofthe company. Disclosing the contingent liabilities is like giving therival the recipe of your most secret dish and expecting that he wontcook it and sell it in the market. so a company should never discloseits contingent liabilities completely.

Answer 2During war time a company applies for a big loan in the bank. Asnecessary documentation is required, the bank asks information for thepurpose of loan. Company as discussed in their contingent liabilitiesdoesnt tell the real purposes rather tell that they want to establish acotton factory. However the real purpose is to buy weapons at nominalprice and sell them at higher rates as there is a big market demand forweapons due to war.The bank will face loss by two different angles1. The percentage of profit would be far more than the interest rateof the bank.2. A bad name to the bank will be earned.

Answer 3Reporting contingent liabilities needs a great deal of care to makesure to satisfy the rival still not telling the recipe of thesuccess. For example whenever making a deal the company shouldemphasize the other one that they will be getting double of what theyinvest careful not to tell that the company itself will be triplingits investments. like wise theres no need of telling who will beearning a good name from the market. Just focus on the benefits of theopposition when in front of them. Noneed of mentioning your ownbenefits.