on january 17 of the current year, an explosion occurred at a sims co. plant causing extensive property damage to area buildings. although no claims had yet been asserted against sims by march 10, sims' management and counsel concluded that it is likely that claims will be asserted and that it is reasonably possible sims will be responsible for damages. sims' management believed that $1,250,000 would be a reasonable estimate of its liability. sims' $5,000,000 comprehensive public liability policy has a $250,000 deductible clause. in sims' prior year december 31 financial statements, which were issued on march 25 of the current year, how should this item be reported?