22 Subsequent Events

Question 1

What are the two categories of subsequent events?

Answer 1

Existed at the balance sheet date (Type I)
Did not exist at the balance sheet date (Type II)

Question 2

How do you account for a type I subsequent event?

Answer 2

Accrual in the financial statements and footnote disclosure

Question 3

How do you account for a type II subsequent event?

Answer 3

Footnote disclosure only

Question 4

What is a type II subsequent event?

Answer 4

A subsequent event that provides evidence of a condition that did not exist at the balance sheet date but that affects information reported in the financial statements, requiring disclosure.

Question 5

What is a subsequent event?

Answer 5

A material event that takes place after the balance sheet date (usually 12/31) but before the financial statements are issued or are available to be issued.

Question 6

What is a type I subsequent event?

Answer 6

A subsequent event that provides evidence of a condition that existed at the balance sheet date, requiring adjustment to the financial statements.

Question 7

For a public entity (or an entity that widely distributes its financials), what is the period of evaluation for subsequent events?

Answer 7

Between the balance sheet date and the date that the financial statements are issued

Question 8

For a non-public entity whose financials are not widely distributed, what is the period of evaluation for subsequent events?

Answer 8

Between the balance sheet date and the date that the financial statements are available to be issued

Question 9

What should footnote disclosure for a type II subsequent event include?

Answer 9

A description of the nature of the event
An estimate of the financial effect or a statement that an estimate cannot be made

Question 10

List examples of subsequent events.

Answer 10

Lawsuits, changes in corporate structure, issuances of debt and equity securities, major acquisitions, natural disasters, and significant gains and losses.