Henderson Company was sued for patent infringement by Foster Company and lost the case in the trial court. After discussion with company counsel, Henderson Company believes that since the court's initial decision was unfavorable, it is probable that it will lose the lawsuit on appeal and will owe Foster Company $$352,000.$

Required:

Select the best accounting approach for this item.

Accrue loss$/$expense and disclose in financial statement footnotes

Disclose in financial statement footnotes only

No accounting required