In short
Subsequent events are events after the balance sheet date but before the financial statements are issued (or available to be issued). Recognized events adjust the statements; nonrecognized events may only need disclosure.
Key takeaways
- Recognized: the event gives evidence about a condition that existed at the balance sheet date, such as a customer's bankruptcy from a long decline.
- Nonrecognized: the condition arose after the balance sheet date, such as a fire or a bond issue.
- Public companies evaluate through the date the statements are issued; others through the date they are available to be issued.
Where it's tested
FAR: Notes, Subsequent Events & Going Concern — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A customer with a large outstanding receivable declared bankruptcy two weeks after the balance sheet date, having been in severe financial distress for months before year-end. How should this be treated?