Contingent liabilities

Hi,

I am trying to answer a MCQ in the BBP revision kit.

A managing director is taking legal action against a company for unfair dismissal to obtain compensation for loss of his employment. The directors of the company believe that there is a 35% chance of the managing director succeeding in his claim. I excluded the two answers suggesting to record a provision. The other two are answers are:

1) accounting treatment=No provision but disclose as contingent liability
Reason=A present obligation exists, but the outflow of economic resources is not probable

2)accounting treatment=No provision but disclose as contingent liability
Reason=A possible obligation exists, depending on whether or not some uncertain future event occurs

I had chosen option 2 but apparently I was wrong looking at the answers. Could you please explain me why? I do not understand.

Thank you

Kind Regards,

Salvatore