SherwinWilliams 114 YearOld Liabilit Background SherwinWilliams may have

Sherwin-Williams' 114 -Year-Old Liabilit

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

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.

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

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.