ASC 855, Subsequent Events, consists of one Subtopic:
ASC 855 applies to all entities and all transactions except for those covered in other Codification Topics.
ASC 855 describes the circumstances under which an entity should recognize events or transactions in its financial statements that occur subsequent to the balance sheet date, but before the financial statements are available to be issued. This can have a potentially significant impact on loss contingencies.
Source: ASC 855-20. See Appendix A, Defintions of Terms, for other terms related to this topic: Conduit Debt Secutiries, Financial Statements are Available to be Issued, Financial Statements are Issued, and Securities and Exchange Commission (SEC) Filers.
Revised Financial Statements. Financial statements revised only for either of the following conditions:
Subsequent Events. Events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. There are two types of subsequent events:
The statement of financial position is dated as of the last day of the fiscal period, but a period of time usually elapses before the financial statements are issued. During this period, significant events or transactions may have occurred that materially affect the company's financial position. These events and transactions are called subsequent events. The omission of disclosure of significant events occurring between the date of the statement of financial position and issuance date of the financial statements could mislead the reader who is otherwise unaware of those events.
SEC filers and conduit bond obligors for conduit debt securities traded in a public market are required to evaluate subsequent events through the date the financial statements are issued. All other entities must evaluate subsequent events through the date the financial statements are available to be issued. (ASC 855-10-25-1A)
There are two types of subsequent events, which relate to when the event or transaction occurred and determine the accounting treatment:
The following table presents a variety of sample situations occurring after the balance sheet date but before the financial statements are available to be issued, and that apply to these two types of subsequent events:
Event | Accounting Treatment |
Litigation is settled for an amount different from the recorded liability | (1) |
Loss on a customer receivable caused by customer bankruptcy | (1) |
Loss of assets due to a natural disaster | (2) |
Loss on receivables from conditions arising after the balance sheet date | (2) |
Changes in the fair value of assets or liabilities | (2) |
Issuing significant guarantees | (2) |
(1) Recognize within the financial statements if they are not yet available to be issued.(2) Do not recognize until the next reporting period. |
An entity should disclose the date through which it has evaluated subsequent events, and whether that date is the date when the financial statements were issued or available to be issued. For revised financial statements, disclose both the dates through which subsequent events have been evaluated through the issued or available-to-be-issued financial statements, and for the revised financial statements.
If a nonrecognized event is so significant that the financial statements would be misleading without disclosure of it, note the nature of the event and an estimate of its financial effect, or a statement that the entity cannot create such an estimate.
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