What general types of subsequent events require Namiki consideration and evaluation?
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Publication date: 29 Nov 2021 us Financial statement presentation guide 28.4 As discussed in ASC 855-10-20, there are two types of subsequent events: Excerpt of definition from ASC 855-10-20
Recognized subsequent events (see FSP 28.5) are pushed backed and recorded in the financial statements to be issued. Examples include the realization of a loss on the sale of inventory or property held for sale when the subsequent act of sale confirms a previously existing unrecognized loss. See FSP 28.5 for other examples. Nonrecognized subsequent events (see FSP 28.6) are considered for disclosure based on their nature to keep the financial statements from being misleading. An example is a natural disaster that destroys a facility after the balance sheet date. See FSP 28.6.3 and 855-10-55-2 for other examples. PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Please ensure Back to the Original document This view is read only. To access this content, click on "Go to content" Events that occur after a company’s year-end period but before the release of its financial statements What are Subsequent Events?Subsequent events are events that occur after a company’s year-end period but before the release of the financial statements. In other words, subsequent events are events that happen between the cut-off date and the date in which the company issues its financial statements. Depending on the situation, subsequent events may require disclosure in a company’s financial statements. Understanding Reporting Period, Cut-off, and Subsequent EventsThe typical reporting period for a company is 12 months. However, a reporting period does not need to match the calendar year from January 1 to December 31. Typically, companies will choose a year-end corresponding to a period of low activity. For example, retailers usually follow a year-end at the end of January when inventory is low (post-holiday season). The cut-off date refers to the end of the reporting period and the start of the new reporting period. It is important in accrual accounting because cash cycles may not be complete. Therefore, it is necessary to understand which events will be during the current reporting period and which events will be recorded in the next reporting period. Transactions and events are recognized up to the cut-off date. Between the period of the cut-off date and the authorization of financial statements issuance is the subsequent events period. Depending on the type of subsequent event, it may or may not require an adjustment to the financial statements. Transactions and events that change the measurement of transactions before the cut-off date are recognized. ExampleAfter the cut-off period (after the company’s year-end) and before the issuance of financial statements, Company A’s major client unexpectedly goes bankrupt. It is determined that the company will only get 10% of its outstanding accounts receivable from the major client. The event will require an adjustment to the financial statements of Company A. Types of Subsequent EventsThere are two types of subsequent events: 1. Adjusting eventsAn event that provides additional information about pre-existing conditions that existed on the balance sheet date. 2. Non-adjusting eventsA subsequent event that provides new information about a condition that did not exist on the balance sheet date. Accounting for Subsequent EventsFor subsequent events that provide additional information about pre-existing conditions that existed on the balance sheet date, the financial statements are adjusted to reflect this additional information. For example:
For subsequent events that are new events and thus do not provide additional information about pre-existing conditions that existed on the balance sheet, these events are not recognized in the financial statements. However, a subsequent event footnote disclosure should be made so that investors know the event occurred. For example:
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What general types of subsequent events require consideration and evaluation by the management and the audit team?There are two types of subsequent events:. Adjusting events. An event that provides additional information about pre-existing conditions that existed on the balance sheet date.. Non-adjusting events. A subsequent event that provides new information about a condition that did not exist on the balance sheet date.. Which type of subsequent event requires consideration by management and evaluation by the auditor?Which type of subsequent event requires consideration by management and evaluation by the auditor? Subsequent events that have a direct effect on the financial statements and require adjustment.
What is a Type 2 subsequent event?2) Type 2 or non-recognized events are then events that were not ongoing and occurred after the year end. These accounting subsequent events should not be disclosed within the current financials, but a subsequent event footnote disclosure should be made in the financials so that investors know that the event did occur.
What are considered subsequent events?What is a Subsequent Event? A subsequent event is an event that occurs after a reporting period, but before the financial statements for that period have been issued or are available to be issued. Depending on the situation, such events may or may not require disclosure in an organization's financial statements.
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