The Argyle Corp. is the defendant in a lawsuit involving someone who was injured on its property in 2016. At the end of 2017, the company's attorneys tell the company that it is "reasonably possible" that the company will lose the suit, and the most likely amount it will have to pay is $400,000. This is a material number. The proper accounting is to

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When a loss is considered "reasonably possible" but not probable, and the amount can be reasonably estimated, the appropriate accounting treatment under U.S. GAAP is to disclose the contingency in the notes to the financial statements without accruing a liability.