F2 M2

Answer 1

Subsequent event: An event or transaction that occurs after the BS date but before the
FS are issued or are available to be issued

Answer 2

Subsequent events can be divided into two categories: Recognized and Nonrecognized
SE

Answer 3

Recognized SE: Provides additional info about conditions that existed at the BS date.
Entities must recognize the effects of all of these in the FS and MUST record a JE and
disclose

Answer 4

Two recognized SE: settlement of litigation and loss on an uncollectible receivable

Answer 5

Nonrecognized SE: An entity shouldn’t recognize SE that provide info about conditions
that did not exist at the balance sheet date

Answer 6

Examples of events that occurred AFTER the BS date and did not exist at BS date:
settlement of litigation, IF the litigation arose after the BS date, changes in fair value of
assets or liabilities, and sale of bond or capital stock

Answer 7

A nonrecognized SE should be a disclosure ONLY (if it is material)

Answer 8

Public companies must evaluate SE through the date that the FS are issued

Answer 9

Private companies must evaluate SE through the date that the FS are available to be
issued

Answer 10

Reissuance of FS: When an entity reissues its FS, the entity shouldn’t recognize events
that occurred between the date the original FS were issued or available to be issued and
the date the FS were actually reissued

Answer 11

FS are considered to be available to be issued when (1) the FS are in a form and format
that comply with GAAP, and (2) all approvals necessary for the issuance of the FS have
been received

Answer 12

A public company MUST allow the SE information to end at the date that the FS are
issued, NOT JUST WHEN THEY ARE AVAILABLE TO BE ISSUED (different from
private comp)

Answer 13

A public company DOES NOT have to disclose the date through which SE have been
evaluated

Answer 14

FS are considered to be issued when the FS HAVE BEEN (1) WIDELY distributed to FS
users and (2) FS are in form and format that comply with GAAP

Answer 15

If a stock price is $50 on Dec 31 Y1 and it changes to be $25 before FS are issued, this
is not a SE because the stock market is always changing. At Dec 31, that # is accurate
and reliable and it does not need to be disclosed that there was a change in stock price

Answer 16

If a customer that had significant aged invoices at YE announced bankruptcy in January,
(before FS were issued) the amt should be disclosed and accrued for

Answer 17

If a customer who has a record of paying on time has outstanding invoices w/a comp at
YE and the customer experiences a flood and files for bankruptcy, then this would ONLY
be a disclosure (no BDE or allowance for doubtful accs was accrued since the comp has
a record for paying on time)