ASC

ASC 855-10

Overall

855 Subsequent Events

Download JSONDownload Markdown35 paragraphs · 13 sectionsIncludes SEC contentJump to summary

Source downloaded: .Record version 5dd13b9293db. Effective date must be checked in the source.

In brief

IntroductoryRecognitionDisclosurePresentationFinancial statement presentation

ASC 855-10 governs how entities account for and disclose events that occur after the balance sheet date but before the financial statements are issued or available to be issued. Events providing additional evidence about conditions that existed at the balance sheet date are "recognized subsequent events" and must be reflected in the financial statements (855-10-25-1); events reflecting conditions arising only after the balance sheet date are "nonrecognized" and are only disclosed if needed to keep the statements from being misleading (855-10-25-3; 855-10-50-2). It applies to all entities but yields to any other Codification Topic that addresses the same post-balance-sheet event (855-10-15-4).

Key points (7)
  • An entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the balance sheet date, including estimates inherent in preparing the statements (855-10-25-1).
  • An entity shall not recognize subsequent events evidencing conditions that did not exist at the balance sheet date but arose afterward (855-10-25-3); examples include post-balance-sheet debt or stock issuances, business combinations, fires, and changes in fair value or FX rates (855-10-55-2).
  • SEC filers and conduit bond obligors for publicly traded conduit debt evaluate subsequent events through the date the financial statements are issued (855-10-25-1A); all other entities evaluate through the date the statements are available to be issued (855-10-25-2).
  • A non-SEC-filer must disclose the date through which subsequent events were evaluated and whether that date is the issuance date or the available-to-be-issued date (855-10-50-1), including in revised (reissued) financial statements for both the original and revised statements (855-10-50-4).
  • For nonrecognized subsequent events that must be disclosed to keep the statements from being misleading, disclose the nature of the event and an estimate of its financial effect or a statement that such an estimate cannot be made (855-10-50-2); pro forma data, sometimes columnar on the face of the historical statements, should be considered (855-10-50-3; 855-10-45-1).
  • In reissued financial statements, an entity shall not recognize events occurring after the statements were originally issued or available to be issued unless the adjustment is required by GAAP or regulatory requirements (855-10-25-4).
  • The Topic applies to all entities and only to subsequent events not addressed elsewhere; other Topics govern where applicable, e.g., 740-10-25-15 (tax positions), 260-10-55-12 (stock splits/dividends and EPS), and 450-30-25-1 (gain contingencies) (855-10-15-2 through 15-5).

For students. Exams love the recognized vs. nonrecognized distinction: the test is whether the underlying condition existed at the balance sheet date (litigation settled after year-end for events occurring before year-end is recognized; litigation from a post-year-end event is not). A common misunderstanding is that all significant post-year-end events get booked — most only get disclosed, and SEC filers are exempt from disclosing the evaluation date.

subsequent eventsrecognized subsequent eventnonrecognized subsequent eventdate financial statements are issuedavailable to be issuedsec filerconduit bond obligorreissued financial statements

Machine-generated study aid for ASC 855-10. Check the source paragraphs below.

855-10-00Status

Source downloaded: .Record version f250cd80bc50. Effective date must be checked in the source.

855-10-05Overview and Background

Source downloaded: .Record version 4715329b8c32. Effective date must be checked in the source.

855-10-05-1
This Topic provides guidance on principles and requirements for subsequent events.

855-10-15Scope and Scope Exceptions

Source downloaded: .Record version a412a99db048. Effective date must be checked in the source.

Overall Guidance

855-10-15-1
The Scope Section of the Overall Subtopic establishes the pervasive scope for the Subsequent Events Topic.

Entities

855-10-15-2
The guidance in the Subsequent Events Topic applies to all entities.

Transactions

855-10-15-3
The guidance in the Subsequent Events Topic shall be applied in the accounting for, and disclosure of, subsequent events not addressed in other Topics of the Codification.
855-10-15-4
Other Topics may address the accounting treatment of events or transactions that occur after the balance sheet date. If an event or transaction is within the scope of another Topic, then an entity shall follow the guidance in that Topic, rather than the guidance in this Topic.
855-10-15-5
The following are examples (not collectively exhaustive) of other subsequent events guidance that is not consistent with the principles in this Topic for the recognition and disclosure of events or transactions that occur after the balance sheet date.
  1. a
    Income Taxes—See paragraph 740-10-25-15 for guidance on changes in judgment after the balance sheet date that results in subsequent recognition, derecognition, or change in measurement of a tax position taken in a prior annual period.
  2. b
    Earnings per Share—See paragraph 260-10-55-12 for guidance on the effect on earnings per share of changes in the number of common shares as a result of a stock dividend or stock split that occurs after the balance sheet date but before the financial statements are issued or are available to be issued.
  3. c
    Gain Contingencies—See paragraph 450-30-25-1 for guidance on gain contingencies that are rarely recognized after the balance sheet date but before the financial statements are issued or are available to be issued.

855-10-25Recognition

Source downloaded: .Record version bcb301937981. Effective date must be checked in the source.

Recognized Subsequent Events

855-10-25-1
An entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. See paragraph 855-10-55-1 for examples of recognized subsequent events.
855-10-25-1A
An entity that meets either of the following criteria shall evaluate subsequent events through the date the financial statements are issued:
  1. a
    It is an SEC filer.
  2. b
    It is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets).
855-10-25-2
An entity that meets neither criteria in the preceding paragraph shall evaluate subsequent events through the date that the financial statements are available to be issued.

Nonrecognized Subsequent Events

855-10-25-3
An entity shall not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date but before financial statements are issued or are available to be issued. See paragraph 855-10-55-2 for examples of nonrecognized subsequent events.
855-10-25-4
An entity may need to reissue financial statements, for example, in reports filed with the SEC or other regulatory agencies. After the original issuance of the financial statements, events or transactions may have occurred that require disclosure in the reissued financial statements to keep them from being misleading. An entity shall not recognize events occurring between the time the financial statements were issued or were available to be issued and the time the financial statements were reissued unless the adjustment is required by GAAP or regulatory requirements. Similarly, an entity shall not recognize events or transactions occurring after the financial statements were issued or were available to be issued in financial statements that are later reissued in comparative form along with financial statements of subsequent periods unless the adjustment meets the criteria stated in this paragraph.

855-10-45Other Presentation Matters

Source downloaded: .Record version 849a6a92fff3. Effective date must be checked in the source.

Nonrecognized Subsequent Events

855-10-45-1
As indicated in paragraph 855-10-50-3, in some situations, an entity also shall consider presenting pro forma statements, usually a balance sheet only, in columnar form on the face of the historical statements.

855-10-50Disclosure

Source downloaded: .Record version 44e81bc5bc6f. Effective date must be checked in the source.

Date Through Which Subsequent Events Have Been Evaluated

855-10-50-1
If an entity is not an SEC filer, then the entity shall disclose both of the following:
  1. a
    The date through which subsequent events have been evaluated
  2. b
    Whether that date is either of the following:
    1. 1
      The date the financial statements were issued
    2. 2
      The date the financial statements were available to be issued.

Nonrecognized Subsequent Events

855-10-50-2
Some nonrecognized subsequent events may be of such a nature that they must be disclosed to keep the financial statements from being misleading. For such events, an entity shall disclose the following:
  1. a
    The nature of the event
  2. b
    An estimate of its financial effect, or a statement that such an estimate cannot be made.
855-10-50-3
An entity also shall consider supplementing the historical financial statements with pro forma financial data. Occasionally, a nonrecognized subsequent event may be so significant that disclosure can best be made by means of pro forma financial data. Such data shall give effect to the event as if it had occurred on the balance sheet date. In some situations, an entity also shall consider presenting pro forma statements, usually a balance sheet only, in columnar form on the face of the historical statements.

Revised Financial Statements

855-10-50-4
Unless the entity is an SEC filer, an entity shall disclose in the revised financial statements the dates through which subsequent events have been evaluated in both of the following:
  1. a
    The issued or available-to-be-issued financial statements
  2. b
    The revised financial statements.
855-10-50-5
Revised financial statements are considered reissued financial statements. For guidance on the recognition of subsequent events in reissued financial statements, see paragraph 855-10-25-4.

855-10-55Implementation Guidance and Illustrations

Source downloaded: .Record version a15596fe6882. Effective date must be checked in the source.

Implementation Guidance

855-10-55-1
The following are examples of recognized subsequent events addressed in paragraph 855-10-25-1:
  1. a
    If the events that gave rise to litigation had taken place before the balance sheet date and that litigation is settled after the balance sheet date but before the financial statements are issued or are available to be issued, for an amount different from the liability recorded in the accounts, then the settlement amount should be considered in estimating the amount of liability recognized in the financial statements at the balance sheet date.
  2. b
    Subsequent events affecting the realization of assets, such as inventories, or the settlement of estimated liabilities, should be recognized in the financial statements when those events represent the culmination of conditions that existed over a relatively long period of time.
855-10-55-2
The following are examples of nonrecognized subsequent events addressed in paragraph 855-10-25-3:
  1. a
    Sale of a bond or capital stock issued after the balance sheet date but before financial statements are issued or are available to be issued
  2. b
    A business combination that occurs after the balance sheet date but before financial statements are issued or are available to be issued (Topic 805 requires specific disclosures in such cases.)
  3. c
    Settlement of litigation when the event giving rise to the claim took place after the balance sheet date but before financial statements are issued or are available to be issued
  4. d
    Loss of plant or inventories as a result of fire or natural disaster that occurred after the balance sheet date but before financial statements are issued or are available to be issued
  5. e
    Changes in estimated credit losses on receivables arising after the balance sheet date but before financial statements are issued or are available to be issued
  6. f
    Changes in the fair value of assets or liabilities (financial or nonfinancial) or foreign exchange rates after the balance sheet date but before financial statements are issued or are available to be issued
  7. g
    Entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees after the balance sheet date but before financial statements are issued or are available to be issued.

855-10-60Relationships

Source downloaded: .Record version 5b98980879f2. Effective date must be checked in the source.

Property, Plant, and Equipment

855-10-60-1
For guidance on the classification of a long-lived asset to be sold when held-for-sale criteria are met after the balance sheet date but before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25), see paragraph 360-10-45-13.

Income Taxes

855-10-60-2
For guidance on accounting and disclosure when an election to change an entity's tax status is approved by the tax authority (or filed, if approval is not necessary) early in Year 2 and before the financial statements for Year 1 are issued or are available to be issued (as discussed in Section 855-10-25), see paragraphs 740-10-25-34, 740-10-50-4, and 740-10-55-48.

855-10-65Transition and Open Effective Date Information

Source downloaded: .Record version 93c5d118560b. Effective date must be checked in the source.

855-10-65-1
Paragraph superseded on 12/15/2010 after the end of the transition period stated in Accounting Standards Update No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.

855-10-S00StatusSEC

Source downloaded: .Record version 73ac4b504570. Effective date must be checked in the source.

855-10-S00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
855-10-S99-2AmendedAccounting Standards Update No. 2010-0401/15/2010

855-10-S25RecognitionSEC

Source downloaded: .Record version 3e54b725c2f3. Effective date must be checked in the source.

Type I Subsequent Events

855-10-S25-1
See paragraph 855-10-S99-2, SEC Staff Announcement: Issuance of Financial Statements, for SEC Staff views on the accounting for Type I subsequent events.

Dividends Declared by the Subsidiary after the Balance Sheet Date

855-10-S25-2
See paragraph 855-10-S99-1, SAB Topic 1.B.3, for SEC Staff views on the recognition of dividends declared after the balance sheet date.

855-10-S50DisclosureSEC

Source downloaded: .Record version f0a23083a850. Effective date must be checked in the source.

Dividends Declared by a Subsidiary After the Balance Sheet Date

855-10-S50-1
See paragraph 855-10-S99-1, SAB Topic 1.B.3, for SEC Staff views on disclosure of dividends declared after the balance sheet date.

855-10-S99SEC MaterialsSEC

Source downloaded: .Record version 49b999670429. Effective date must be checked in the source.

SEC Staff Guidance

855-10-S99-1
The following is the text of SAB Topic 1.B.3, Other Matters.
  • Question: What is the staff's position with respect to dividends declared by the subsidiary subsequent to the balance sheet date?
  • Interpretive Response: The staff believes that such dividends either be given retroactive effect in the balance sheet with appropriate footnote disclosure, or reflected in a pro forma balance sheet. In addition, when the dividends are to be paid from the proceeds of the offering, the staff believes it is appropriate to include pro forma per share data (for the latest year and interim period only) giving effect to the number of shares whose proceeds were to be used to pay the dividend. A similar presentation is appropriate when dividends exceed earnings in the current year, even though the stated use of proceeds is other than for the payment of dividends. In these situations, pro forma per share data should give effect to the increase in the number of shares which, when multiplied by the offering price, would be sufficient to replace the capital in excess of earnings being withdrawn.
855-10-S99-2
The following is the text of SEC Staff Announcement: Issuance of Financial Statements.
  • In considering when financial statements have been issued, the SEC staff observed that Rules 10b-5 and 12b-20 under the Securities Exchange Act of 1934 and General Instruction C(3) to Form 10-K specify that financial statements must not be misleading as of the date they are filed with the Commission. For example, assume that a registrant widely distributes its financial statements but, before filing them with the Commission, the registrant or its auditor becomes aware of an event or transaction that existed at the date of the financial statements that causes those financial statements to be materially misleading. If a registrant does not amend those financial statements so that they are free of material misstatement or omissions when they are filed with the Commission, the registrant will be knowingly filing a false and misleading document. In addition, registrants are reminded of their responsibility to, at a minimum, disclose subsequent events, FN1 while independent auditors are reminded of their responsibility to assess subsequent events FN2 and evaluate the impact of the events or transactions on their audit report. FN3
    • FN1 See AU Section 560, Subsequent Events, paragraphs 5 and 8 and Section 855-10-50.
    • FN2 See AU 560 and AU Section 561, Subsequent Discovery of Facts Existing at Date of the Auditor's Report.
    • FN3 See AU Section 530, Dating of the Independent Auditor's Report, and AU 560, paragraph 9.
  • A registrant and its independent auditor have responsibilities with regard to post-balance-sheet-date subsequent events, as well as the application of authoritative literature applicable to such events. See Topic 855 and AU 560, Subsequent Events, paragraph 3.
  • Generally, the staff believes that financial statements are "issued" as of the date they are distributed for general use and reliance in a form and format that complies with generally accepted accounting principles (GAAP) and, in the case of annual financial statements, that contain an audit report that indicates that the auditors have complied with generally accepted auditing standards (GAAS) in completing their audit. Issuance of financial statements then would generally be the earlier of when the annual or quarterly financial statements are widely distributed to all shareholders and other financial statement users FN4 or filed with the Commission. Furthermore, the issuance of an earnings release does not constitute issuance of financial statements because the earnings release would not be in a form and format that complies with GAAP and GAAS.
    • FN4 Posting financial statements to a registrant's web site would be considered wide distribution to all shareholders and other financial statement users if the registrant uses its web site to disclose information to the public in a manner consistent with the requirements of Regulation FD. See the Commission's interpretive guidance in Exchange Act Release No. 58288 (Aug. 7, 2008).

Related subtopics