M5 Flashcards
What is a subsequent event
An event that occurs after the balance sheet date, but before the financial statements are issued or are available to be issued
What is a recognized subsequent event
Provides additional information regarding conditions that existed before or on the balance sheet date
What are 2 examples of recognized subsequent events?
Settlement of litigation (if litigation arose before the BS date)
Loss on an uncollectible receivable
Non recognized subsequent events
a subsequent event that provides information about conditions that did not exist at the balance sheet date
When should Non recognized subsequent events be disclosed
If abscense of disclosure would lead the financial statements to be misleading
What are 4 examples of nonrecognized subsequent events
Sale of bond or capital stock
Mergers
Settlement of litigation, if litigation arose after the BS date
Change in FV
Loss of PPE
If there are reissues of financial statements does the entity need to deal with subsequent events through the reissuance date>
No not unless GAAP requires it
Under what conditions should a entity revise the date which subsequent events have been evaluated?
If the entity is not a SEC filer(private) and they revised their financial statements
When are entities required to disclose the date through which subsequent events have been evaluated?
When they are private corporations
The December 31, Year 1, financial statements of Edwards Co. (a privately held company) were available to be issued on March 1, Year 2, and were actually issued on March 3, Year 2. As of December 31, Year 1, Edwards Co. had 250,000 shares of common stock outstanding. On February 15, Year 2, Edwards Co. issued 500,000 more shares of common stock. As a result of this transaction, Edwards Co. must:
I.
Adjust the amount of common stock reported on its December 31, Year 1, balance sheet.
II.
Provide disclosure about the stock issuance in the footnotes included with the December 31, Year 1, financial statements.
II
