Big Hitter Corp. is facing a class-action lawsuit in the upcoming year. It is possible, but not probable, that the company will have to pay a settlement of approximately $2,000,000 in the upcoming year. How would this fact be reported, if at all, in the financial statements prepared at the end of the current month using GAAP?

a. Report $2,000,000 as a current liability.
b. Report $2,000,000 as a long-term liability.
c. Describe the potential liability in the notes to the financial statements.
d. Reporting is not required in this case.