Problem: In the March 2014 meeting of the Valleck Corporations 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 controllers office for inclusion in the annual report. Here is the note: On May 9, 2013 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 2013, 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 2014.

Required: What would be the accounting treatment of the $205,000 loss if the loss contingency had the likelihood of being Reasonable possible or Remote?