In the March 2022 meeting of Valleck Corporation's board of directors, a question arose as to the way a possible obligation should be disclosed in the forthcoming financial statements for the year ended December 31. A veteran board member brought to the meeting a draft of a disclosure note that had been prepared by the controller's office for inclusion in the annual report. Here is the note: On May 9, 2021, the United States Environmental Protection Agency (EPA) issued a Notice of Violation (NOV) to Valleck alleging violations of the Clean Air Act. Subsequently, in June 2021, the EPA commenced a civil action with respect to the foregoing violation seeking civil penalties of approximately $853,000. The EPA alleges that Valleck exceeded applicable volatile organic substance emission limits. The Company estimates that the cost to achieve compliance will be $190,000; in addition the Company expects to settle the EPA lawsuit for a civil penalty of $205,000 which will be paid in 2022. "Where did we get the $205,000 figure?" he asked. On being informed that this is the amount negotiated last month by company attorneys with the EPA, the director inquires, "Aren't we supposed to report a liability for that in addition to the note?" Required: Should Volleck report a liability in addition to the note, and should anything be added to the disclosure note itself? Valleck should accrue the $190,000 compliance cost and disclose the $205,000 penalty. O Valleck should accrue both the $190,000 compliance cost and the $205,000 penalty. Volleck should disclose but not accrue both the $190,000 compliance cost and the $205,000 penalty