An entity is currently under investigation for providing defective products to their customers. If found guilty, the entity may be required to compensate their customers for approximately $500 000. The court case is still pending and the outcome will not be known until later in the next financial year. For the current financial year, the amount of $500,000 will be:

a. disclosed in the notes to the financial statements as a contingent liability.

b. recognised in the balance sheet as a contingent liability

c. recognised in the balance sheet as an asset.

d .recognised in the balance sheet as a liability.