FAR, Financial Accounting and Reporting
Sources for Subsequent Events
Last reviewed
The standards and authorities behind PocketCPA's FAR lessons on Subsequent Events. The topic rests on ASC 855.
About this topic
A set of financial statements carries a specific balance sheet date, but the work is not finished on that date. Weeks or months pass while the books close, the auditors work, and management assembles the final document.
Things happen in that gap. A lawsuit settles, a customer goes bankrupt, a hurricane damages a plant, the company issues stock or buys a competitor.
Key points
- Recognized (Type I) subsequent events provide additional evidence about conditions that existed at the balance sheet date and require adjustment.
- Nonrecognized (Type II) subsequent events arise after the balance sheet date and require disclosure only.
- The evaluation period ends when financial statements are available to be issued (SEC filers) or are issued (all others).
- A subsequent event requiring restatement after issuance triggers dual dating or reissuance with a new date.
What the lessons cover
- The subsequent-events window: definitions and scope (ASC 855-10-20)
- Recognized (Type I) events: adjust the statements (ASC 855-10-25-1)
- Nonrecognized (Type II) events: disclose only (ASC 855-10-25-3)
- The evaluation period: issued versus available to be issued (ASC 855-10-25-1A)
- Reissuance and revised financial statements (ASC 855-10-25-4)
- Disclosures (ASC 855-10-50-1)
Authoritative references
- ASC 855-10-15, scope: a default framework, not an override, so a Topic that speaks directly to the event governs.
- ASC 855-10-20, the definitions and the subsequent-events window.
- ASC 855-10-25-1, a recognized (Type I) event, for which the entity adjusts the financial statements.
- ASC 855-10-25-1A and 25-2, the two groups and their cutoffs: through the date the statements are issued for an SEC filer or a conduit bond obligor with publicly traded debt, and through the date they are available to be issued for everyone else.
- ASC 855-10-25-3, a nonrecognized (Type II) event, disclosed when material but never booked.
- ASC 855-10-25-4, reissuance and revised financial statements, including the exception for a correction of an error or a change required by GAAP.
- ASC 855-10-50-1 through 50-3, the date through which subsequent events were evaluated, the nature and estimate of a nonrecognized event, and the pro forma option.
- ASC 855-10-50-4 and 50-5, the revision disclosure, and revised statements themselves treated as reissued.
- ASC 855-10-55-1 and 55-2, the canonical patterns, including a customer's major casualty after the balance sheet date as nonrecognized.
Related requirements outside the Topic:
- Going concern, ASC 205-40-50-1.
- Change in accounting principle and in estimate, and correction of an error, ASC 250-10-45, 45-17 and 45-23.
- Retroactive adjustment of earnings per share, ASC 260-10-55-12.
- Loss and gain contingencies, ASC 450-20-25-2, 450-20-50-4 and 450-30-25-1.
- Guarantees, ASC 460-10-25-4 and 30-2.
- Business combinations after the reporting date, ASC 805-10-50-2 and 50-4.
How PocketCPA uses these sources
Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.