At March 13, 2012, the Environmental Protection Agency is in the process of investigating a possible emissions leak last summer at a facility of Now Chemical. The EPA has not yet proposed a penalty assessment. Now’ fiscal year ends on December 31, 2011, and its financial statements are published in March 2012. Management feels an assessment is reasonably possible, and if an assessment is made an unfavorable settlement of $13 million is probable. What, if any, action should Now take for its financial statements?
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