D Ltd is a building construction company based in South Australiawith an estimated profit of $1.1million for the year ended 30 June 2020. The financial statements for the year are currently being prepared and will be authorized for issue by the board of directors at the end of August 2020.
On 31 July 2020, a lawsuit was filed against D Ltd for damage that occurred in September 2019 to a property adjacent to one of their building sites. It was claimed that the damage was a result of negligence on the part of D Ltd workers and the amount claimed was $150 000. On 12 August 2020, D Ltd.'s lawyers have advised that D Ltd has a good chance of winning the case.

Required:
i) Determine whether this event is an adjusting event or a non-adjusting event and explain how it should be accounted for in the financial statements of D Ltd for the year ended 30 June 2020. Support your answer with adequate and appropriate justification and reference to relevant Australian Accounting Standards.
ii) Specify any journal entry(ies) and/or disclosures that may be required. Narrations are not required.

Answer rating: 100% (QA)

As per Accounting Standard AASB 110 Events after the Reporting Period Events after the reporting per... View the full answer