(Answered) Question - ace co settled litigation on february 1 2005 for

Accounting

Question - Ace Co. settled litigation on February 1, 2005 for an event that occurred during 2004. An estimated liability was determined as of December 31, 2004. This estimate was significantly less than the final settlement. The transaction is considered to be material. The financial statements for year-end 2004 have not been issued. How should the settlement be reported in Ace's year-end 2004 financial statements?

Disclosure only of the settlement

Both a disclosure and an accrual

Neither a disclosure nor an accrual

Only an accrual of the settlement

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