Notes, Subsequent Events & Going Concern

Subsequent events

• Recognized: condition existed at the balance sheet date → adjust (lawsuit settled for a pre-year-end event; customer bankrupt from existing deterioration).
• Nonrecognized: condition arose after → disclose only (fire, stock or bond issue, acquisition).
• Securities and Exchange Commission (SEC) filers: through the issued date, not disclosed. Others: through the available-to-be-issued date, disclosed.

Going concern

• Management evaluates, every period.
• Period: 1 year after issuance (or available-to-be-issued) date.
• Threshold: probable the entity can't meet obligations.
• Plans count only if probable of implementation and probable of mitigating.
• Doubt remains → state "substantial doubt" explicitly. Alleviated → disclose conditions and plans.
• Liquidation imminent → liquidation basis.

Related parties

Disclose relationship, transactions, amounts, and balances due. "Arm's-length" claims only if substantiated.

Accounting policies note

Methods, not amounts (inventory method, depreciation method, cash equivalents policy).

Concentrations

Disclose when a severe near-term impact is at least reasonably possible.

Exam traps

• A stock split or stock dividend after year end but before issuance: restate earnings per share (EPS) retroactively.
• Reissued statements don't pick up new recognized subsequent events unless required by accounting standards or regulators.
• Related party disclosures exclude compensation arrangements and expense allowances in the ordinary course of business.