Grim Corporation operates a plant in a foreign country. It is probable that the plant will be expropriated. However, the foreign government has indicated that Grim will receive a definite amount of compensation for the plant.

The amount of compensation is less than the fair market value but exceeds the carrying amount of the plant.

The contingency should be reported:

As a valuation allowance as a part of stockholders' equity.

In the notes to the financial statements.

As a fixed asset valuation allowance account.

In the income statement.