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Z Co. filed suit against W Inc. in 2021 seeking damages for patent infringement. At December 31, 2021, legal counsel for Z believed that it

Z Co. filed suit against W Inc. in 2021 seeking damages for patent infringement. At December 31, 2021, legal counsel for Z believed that it was probable that Z would be successful against W for an estimated amount in the range of $30 million to $60 million, with each amount in that range considered equally likely. Z was awarded $40 million in April 2022. Z should report this award in its 2021 financial statements, issued in March 2022 as:

  • A disclosure of a gain contingency of $40 million.

  • A receivable and deferred revenue of $40 million.

  • A disclosure of a gain contingency of an undetermined amount in the range of $30 million to $60 million.

  • A receivable and revenue of $40 million.

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