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Erismus is defending against a lawsuit in 2021. Erismus's management believes it is reasonably possible that the company will lose in court. If it loses,

Erismus is defending against a lawsuit in 2021. Erismus's management believes it is reasonably possible that the company will lose in court. If it loses, management believes that damages will eventually be $5,320,000, with a present value of $3,724,000. Erismuss fiscal year ends on December 31. Financial statements are issued in March 2022. Erismus prepares its financial statements according to U.S. GAAP. Erismus should report a $______________ liability for the pending lawsuit on its balance sheet dated December 31, 2021.

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