Contingent Liabilitie

Evans & Sons, Inc., received notification from a local attorney that the company was being sued for $$5,000,000$ for patent infringement. A review of the situation by the company$$s CEO led to the conclusion that Evans & Sons had indeed infringed upon the other company$$s patented product. Nonetheless, the CEO thought the amount of $$5,000,000$ was excessive and intended to litigate the issue. How should the lawsuit be reported in Evans & Sons$$ annual report?

A$)$The lawsuit, if material or not, doesn't need to be disclosed in the company's financial statements.

B$)$the lawsuit, if material, should be disclosed in the notes to the company's financial statements only