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Question: ABC Company, a manufacturing firm, is preparing its financial statements for the fiscal year ending December 31, 20X3. The company uses the accrual basis of accounting. You are the senior accountant tasked with assisting in the preparation of these financial statements.

Part A: (a) In the course of your work, you have discovered that the company has several outstanding legal disputes related to product liability claims. These claims have arisen from alleged defects in some of the products the company manufactured and sold during the year. The legal team estimates that it is probable that ABC Company will incur a loss related to these claims, but the exact amount is uncertain.

i. How should ABC Company account for these product liability claims in its financial statements in accordance with generally accepted accounting principles (GAAP)? ii. What disclosures should be made in the financial statements and accompanying notes regarding these contingent liabilities?

Part B: (b) ABC Company operates in multiple countries and conducts transactions in various foreign currencies. Throughout the fiscal year, the exchange rates between these currencies and the company's functional currency (USD) have fluctuated significantly.

i. Explain how ABC Company should account for foreign currency transactions and translations in its financial statements, considering the fluctuating exchange rates. ii. Discuss the potential impact of these foreign currency transactions and translations on the company's reported income and financial position.

Please provide detailed explanations and cite any relevant accounting standards or principles in your response.

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