Developer Ltd is a building construction company based in South Australia with 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 authorised for issue by the board of directors at the end of August 2020.

On 31 July 2020, a lawsuit was filed against Developer 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 Developer Ltd workers and the amount claimed was $150 000. On 12 August 2020, Developer Ltds lawyers have advised that Developer 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 Developer 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.