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Subsequent Event. Events that occur after the close of the fiscal year, before financial statements are published. Three types possible, require different treatment. Subsequent Events:. Event is a culmination of prior conditions and has material effect

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subsequent event
Subsequent Event
  • Events that occur after the close of the fiscal year, before financial statements are published.
  • Three types possible, require different treatment
subsequent events
Subsequent Events:
  • Event is a culmination of prior conditions and has material effect
  • Event is the result of new developments and has a major effect
  • Event is the result of new developments and does not have a major effect
subsequent event culmination of prior condition
Subsequent Event - Culmination of prior condition
  • Requires adjustment of balance sheet:
  • Example: Major customer declares bankruptcy:
  • Required action: Adjust accounts receivables, recognize loss on income statement
subsequent event result of new development
Subsequent Event: Result of new development
  • Event has a material effect:
    • e.g.: major plant facility is destroyed
      • Action required: Footnote disclosure
  • Event does not have material effect:
    • Ignore (will be recognized in new fiscal year)