Delta is an entity which prepares financial statements to 31 March each year. Each year the financial statements are authorised for issue on 20 May. The following events are relevant to the year ended 31 March 2016:

Event (b)
On 1 August 2015, Delta supplied some products it had manufactured to customer C. The products were faulty and on 1 October 2015 C commenced legal action against Delta claiming damages in respect of losses due to the supply of the faulty products. Upon investigating the matter, Delta discovered that the products were faulty due to defective raw materials supplied to Delta by supplier S. Therefore on 1 December 2015, Delta commenced legal action against S claiming damages in respect of the supply of defective materials. Since that date Delta has consistently estimated that it is probable that both of the legal actions, the action of C against Delta and the action of Delta against S, will succeed.

On 1 October 2015, Delta estimated that the damages Delta would have to pay to C would be $5 million. This estimate was updated to $5·2 million as at 31 March 2016 and $5·25 million as at 15 May 2016. This case was eventually settled on 1 June 2016, when Delta was required to pay damages of $5·3 million to C.

On 1 December 2015, Delta estimated that they would receive damages of $3·5 million from S. This estimate was updated to $3·6 million as at 31 March 2016 and $3·7 million as at 15 May 2016. This case was eventually settled on 1 June 2016, when S was required to pay damages of $3·75 million to Delta. (6 marks)

Required:
Explain and show (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2016.

Note: The mark allocation is shown against each of the three events above. You should assume that all amounts described here are material. When discussing event (a), you are not required to consider disclosure requirements.