ASC 855 subsequent events

What are recognized and nonrecognized subsequent events?

• Recognized subsequent events give additional evidence about conditions that existed at the balance sheet date, including the estimates made in preparing the statements. The amounts are adjusted. Examples are the settlement of litigation for an event before year end, and a customer's bankruptcy caused by deterioration that had already begun.
• Nonrecognized subsequent events concern conditions that did not exist at the balance sheet date. The amounts are not adjusted, but material events are disclosed. Examples are a business combination, issuing debt or shares, losses from a fire or flood, changes in market prices, and litigation arising from an event after year end.

The question is always when the underlying condition arose, not when the company learned about it. A loss contingency from an event before year end is accrued if it becomes probable and estimable before the statements are issued. See ASC 450 loss contingencies.

Up to what date are subsequent events evaluated?

SEC filers and conduit bond obligors evaluate subsequent events through the date the financial statements are issued, meaning widely distributed for general use, and do not disclose that date. Other entities evaluate them through the date the statements are available to be issued, meaning complete in a form and format that complies with GAAP and approved for issuance, and must disclose the date and whether it is the date issued or the date available to be issued.

ASC 855 in practice: four events after a 2026 year end

A company with a December 31, 2026 year end issues its statements on February 26, 2027. Between those dates:

The receivable write-down of $600,000 and the extra $400,000 on the lawsuit reduce 2026 profit. The fire does not, because the inventory was intact at year end; the note describes it and its $1,200,000 estimated loss, and any insurance recovery expected. Stock splits after year end are a special case: share and per-share amounts are restated for all periods presented, even though the split is a later event. See ASC 260 earnings per share.

What must be disclosed about nonrecognized events?

The nature of the event and an estimate of its financial effect, or a statement that no estimate can be made. Where an event is significant enough, the company may present pro forma financial data giving effect to it as if it had happened at the balance sheet date, typically for an acquisition or a large debt or equity issue. Disclosures of recognized events may also be needed to keep the statements from being misleading.

What happens when statements are reissued?

When financial statements are reissued, for example in a later registration statement, the company does not recognize events that occurred after the original issue date unless GAAP or regulations require it, such as corrections of errors or retrospective changes. Non-SEC filers disclose both the original and the new evaluation dates. An error discovered later is dealt with under ASC 250. See ASC 250 accounting changes and error corrections.

How do subsequent events affect going concern?

Management assesses under ASC 205-40 whether there is substantial doubt about the company's ability to continue as a going concern within one year after the date the statements are issued or available to be issued, so events up to that date feed into the assessment and its disclosures.

How does ASC 855 compare with IAS 10?

IAS 10 uses the same split, calling them adjusting and non-adjusting events, but evaluates them up to the date the statements are authorized for issue, which the company must disclose along with who authorized them. Dividends declared after year end are not a liability under either framework. Under IAS 10, a decision after year end to liquidate or stop trading means the going concern basis is no longer used. See IAS 10 events after the reporting period and IFRS vs US GAAP key differences.

This guide is general information. It is not tax or legal advice for your situation.