PC Inc., a competitor of Champion Incorporated, filed a lawsuit against Champion for $430,000. Champion's lawyers reviewed the lawsuit and believe that, although PC has a valid case, the suit can be settled out of court for $210,000.

Required

1. Assuming Champion Incorporated follows IFRS, indicate (yes or no) whether the company should recognize a liability in its financial statements.

2. Indicate why a liability should or should not be recognized