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During the year the company commenced legal action against a managing director for alleged theft. At the reporting date, the company legal counsel is the opinion that it is possible that the company will receive a substantial amount in compensation.
How should be this treated in the FS?
1. Do not adjust or disclose
2. Recognise a receivable
3.Provide for the amount
4.Disclose a contingent asset .
Correct answer is 1, why not 4?
Thanks in advance
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