On January 17, an explosion occurred at a Cord Company plant, causing extensive property damage to area buildings. Although no claims had yet been asserted against Cord as of March 10, the company believes it is probable that claims will be asserted. Cord’s management and counsel concluded that it was reasonably possible that Cord would be responsible for damages and that $2,500,000 would be a reasonable estimate of its liability. Cord’s $10,000,000 comprehensive public liability policy has a $500,000 deductible clause. 

Should a liability be accrued or disclosed in the company’s financial statements (to be issued on March 10) covering the calendar year before the accident?