Transportation & Logistics: Contingencies & legal proceedings (ASC 450)

Loss contingencies (other than income tax-related contingencies disclosed above) arise from actual or possible claims and assessments and pending or threatened litigation that may be brought against us. Based on our assessment of loss contingencies at each balance sheet date, a loss is recorded in the financial statements if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If the amount of the loss cannot be reasonably estimated, we disclose information about the contingency in the financial statements. We also disclose information in our financial statements about reasonably possible loss contingencies.

The determination of whether a loss is probable and whether the amount of the loss can be reasonably estimated requires significant judgment and evaluation of all the underlying facts and circumstances including judgments about the potential actions of third-party claimants, regulatory authorities, and courts. Claims, assessments, and litigations involve significant uncertainties such as the complexity of the facts, the legal theories involved, the nature of the claims, the judgment of the courts, the applicable methodology for determining potential damages, and, in the case of class actions, whether a class action can be certified and members of the class choose to participate in the litigation.

For a contingency that might result in a gain, substantially all uncertainties about its realization should be resolved before it is recognized in the financial statements. Recoveries of costs and losses incurred in the past and recorded in the financial statements are recognized when the recovery is probable, reasonably estimable, and there is direct linkage to the loss event. Establishing direct linkage requires judgment and evaluation of all the underlying facts and circumstances, including the relationship between the recovery, the loss event, and the costs and losses incurred.