Subsequent Events - Private Companies Should Pay Attention.

In connection with the Financial Accounting Standards Board’s (FASB) codification project, the FASB has put together a new standard that incorporates the guidance in Auditing Standard 560 – Subsequent Events. This new standard is not expected to change current accounting practices. FAS 165 is applicable for interim and annual periods ending after June 15, 2009. This will be the second quarter 10Q for calendar year companies. (I hope you didn't forget.)

1. What are the changes to the accounting for subsequent events?

There are two changes with the new standard:

a. The date through which management evaluated subsequent events will be disclosed in the financial statements and whether that date is the date the financial statements were issued or were available to be issued.

b. Subsequent events are to be evaluated through the date the financial statements are issued or are available to be issued. The term “available to be issued” applies to non-public companies that do not issue or widely disburse their financial statements. There is no change in the date of evaluation for public companies.

2. What is the accounting for subsequent events?

FAS 165 applies to the accounting for and disclosure of subsequent events not addressed by other applicable generally accepted accounting principles (GAAP) such as FIN 48, FAS 128 or FAS 5. The date through which subsequent events have been evaluated and whether the date is the date the financial statements were issued or were available to be issued will be disclosed in the interim and annual financial statements.

A subsequent event is an event or transaction that occurs after the balance sheet date but before the financial statements are issued or are available to be issued. The FASB changed the names of the kinds of subsequent events. Type 1 subsequent events are now recognized subsequent events and Type 2 subsequent events are now non-recognized subsequent events. I think this is a good change because I could never remember which was which.

A recognized subsequent event is an event or transaction that provides additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. A recognized subsequent event is to be recognized in the financial statements as if they occurred before the balance sheet date.

A non-recognized subsequent event is an event or transaction that provides evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date but before the financial statements are issued or are available to be issued. An entity should disclose non-recognized subsequent events that are of such a nature that omitting them would cause the financial statements to be misleading. The nature of the event and an estimate of its financial effect should be disclosed. An entity should also consider providing pro forma financial statements if the non-recognized subsequent event is significant.

If an entity is required to re-issue its financial statements, subsequent events that have occurred between the date the financial statements were issued and the date they were re-issued should not be recognized.

So the only real change for public companies is making sure to disclose the date through which you evaluated subsequent events. (Which needs to be the file date.)

For private companies the big change is a definition of "available to be issued". This is the date that needs to be disclosed in your financial statements that are given to third parties such as your bank or investor.

So write back and let me know if this caused you any problems? Did any one forget to disclose the date?

This blog

Linda is a CPA living in Southwestern Ohio, working as a research accountant for an investor-owned publicly traded utility company. She specializes in implementing new FASB and SEC requirements and FAS 133 derivative issues. In her role at the utility she has encountered many issues and written many memos, so send in your implementation and derivative issues and Linda will help figure out an answer.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42411

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74603

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47384

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

87004
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19910

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54496

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

79144

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24516

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62894

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33894
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100865
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
25166

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51347
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
26985
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31299

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

98228

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32483

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

109115

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59583

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38534
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65463

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

91282

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52364