Contingent liabilities The following footnote is to be included in the financial statements of PQ Ltd.

The company is being sued by X Ltd for the company’s alleged wilful and deliberate violation of a patent.

The suit seeks unspecified monetary damages as well as an injunction against the company’s operations. It also seeks damages and lawyers’ fees and costs. The company believes that it has meritorious defences against this suit and intends to vigorously defend itself. The company could be forced to incur material expenses during this defence and in the event it were to lose this suit, its business would be harmed.

Should a liability be recorded by PQ Ltd for this contingent liability? Why, or why not?