F2:M5-Subsequent Events Flashcards
What is a subsequent event?
An event that happens after the Balance Sheet due date, but before the financial statements are issued or are available to be issued.
What are the categories that subsequent events be divided into?
Recognized subsequent events
or
Nonrecognized subsequent events
What is a recognized subsequent event?
Also known as a type 1 sebsequent event.
Provides additional info about conditions that existed as of the balance sheet date (means this info is already there in financial statements and new info about has been receivred).
ACTION: Adjust the financial statements.
What are nonrecognized subsequent events?
Also known as type 2 sequent events.
An entity/company should not recognize events that where info is provided about conditions that did not exist at balance sheet date.
**ACTION: **
Disclose if disclosure is necessary to keep financial statments from being misleading.
Not required to adjust fijnancial statements.
What are examples of nonrecognized subsequent events?
Should be disclosed in footnotes if disclosure will keep financials from being misleading.
- Sale of bond or capital stock
- Business combination
- Settlement of litigation, if the litigation arose after the B/S date
- Loss of plain or inventory due to fire or natural disaster
- Changes in FV of assets, liabilities, of FX rates
- Entering into significant commitment, or contigent liabilities
- Loss of receivable resulting from conditions occuring after the B/S date
When do public company who files with the SEC evalute sebsequent events?
A public company who files with the SEC must evaluate subsequent events through the date financial statements are issued.
Evaluate subsequent events longer after declaration of financial stateme
When do private company evalute sebsequent events?
A private company must evalute subsequent events through the date financial statements are available to be issued.
Stop evaluation once compnay declares financial statements are available
What are the events of when financial statements are available?
Financial statements are:
Prepared—>Finalized—> Made available
For Priviate Companies (Do Not File with SEC)
What are the events of when financial statements are issued?
Financial statements are:
Considered issued when they have been widely distributed to users.
How should a company treat a subsequent event if financial statements need to be reissued?
An enity/company should not recognize events that occured between the date original financial statements were issued (or available to be issued) and of reissue unless adjustment is rquried by GAAP or another regulatory requirement.
How should a company treat a subsequent event if financial statements are revised (to correct an error or reflect teh retrospective application of U.S. GAAP)?
Revised financial statements are considered reissued financial statements.
SEC Filer - No disclosure is required
Non-SEC Filer - Must disclose in revised financial statements dates through which subsequent events were evaluated (in both issued/available to be issued) financial statements and its revised financial statements.
Are entities that file financial statements with the SEC required to disclose the date through which subsequent events have been evaluated?
NO, Entities that file with the SEC are not required to disclose the evaluation date for subsequent events.
What must entities that do not file their financial statements with the SEC disclose about subsequent events?
They must disclose:
- The date through which subsequent events were evaluated, and
- Whether that date is the date issued or the date available to be issued.
