You Are Reviewing the Financial Statements of a Company That

You are reviewing the financial statements of a company that is currently the plaintiff in a large civil action. They are very confident that they will win and be awarded a material amount of damages in the next financial year. How should this be recorded in the financial statements?

A) They should recognize a provision for legal award as a current asset in their financial statements.
B) They should disclose the information in a note to the financial statements.
C) They should take no action until the money is received.
D) They should treat this as an adjusting event.