ASC 855
Active
Subsequent Events
Addresses the accounting and disclosure requirements for events occurring after the balance sheet date but before financial statements are issued.
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Conceptual Framework Linkage
Did new information exist at the balance sheet date, or arise afterward?
Between the BALANCE SHEET date and the date financial statements are actually FINALISED, new information often comes to light. ASC 855 draws a sharp distinction based on WHEN the underlying CONDITION actually existed: if the condition existed AT the balance sheet date (just not yet fully known), the financial statements themselves should be ADJUSTED to reflect it; if the condition arose AFTER the balance sheet date, the statements are NOT adjusted, but material events may still require DISCLOSURE.
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Scope
Events between the balance sheet date and issuance
ASC 855 applies to events or transactions occurring AFTER the balance sheet date but BEFORE the financial statements are issued (or available to be issued) – covering both public and private entities.
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The Evaluation Period – Issued vs Available to Be Issued
A two-tier evaluation date depending on entity type
Entity typeEvaluation period ends when...
SEC filers ("issued")The financial statements are WIDELY DISTRIBUTED to shareholders and other financial statement users in a form and format that complies with GAAP
All other entities ("available to be issued")The financial statements are COMPLETE in a form and format that complies with GAAP, and ALL necessary approvals for issuance (e.g. management, board) have been obtained
ASC 855 REQUIRES disclosure of the SPECIFIC DATE through which subsequent events were evaluated, and whether that date represents the date the statements were ISSUED or the date they were AVAILABLE to be issued – a genuinely PRESCRIPTIVE, mandatory disclosure element specific to this two-tier US GAAP construct.
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Type I (Recognized) Subsequent Events
Adjust the financial statements
A TYPE I subsequent event provides ADDITIONAL EVIDENCE about CONDITIONS that EXISTED at the balance sheet date – for example, a customer's bankruptcy filing shortly after year-end confirming that a receivable was ALREADY uncollectible as of year-end. Type I events REQUIRE the financial statements to be ADJUSTED to reflect the new information, since the underlying condition was already present at the balance sheet date.
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Type II (Non-Recognized) Subsequent Events
Disclose, but do not adjust
A TYPE II subsequent event reflects a CONDITION that arose ENTIRELY AFTER the balance sheet date – for example, a major fire destroying a facility, or a significant business combination completed after year-end. Type II events do NOT require adjusting the recognised amounts in the financial statements – but if the event is of such significance that NONDISCLOSURE would make the financial statements MISLEADING, it must be DISCLOSED (including, in some cases, supplemental PRO FORMA financial data).
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Reissued Financial Statements – the Reevaluation Requirement
No reassessment for previously issued statements, but a fresh evaluation upon reissuance
An entity that has ALREADY issued financial statements generally does NOT need to reassess subsequent events for that ORIGINAL issuance as new information emerges. However, if those financial statements are subsequently REISSUED (e.g. included in a later registration statement), the entity must evaluate whether any NEW subsequent events have occurred requiring disclosure or adjustment through the REISSUANCE date – though generally without revising conclusions about events evaluated as of the original issuance date, absent restatement circumstances.
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Worked Example – a Type I Subsequent Event
A condition confirmed after year-end, but existing at year-end
Example: A major customer's bankruptcy filing
A calendar-year entity has a $500,000 receivable outstanding from a major customer at December 31. On January 20 (before the financial statements are issued), the customer files for bankruptcy, and it becomes clear the customer had been insolvent since at least mid-December.
Since the customer's financial distress (the underlying CONDITION) EXISTED at December 31 – the bankruptcy filing merely CONFIRMS a condition that was already present – this is a TYPE I event. The entity must ADJUST its December 31 financial statements, recording a bad debt allowance/write-down for the $500,000 receivable, even though the bankruptcy filing itself occurred after year-end.
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Worked Example – a Type II Subsequent Event
A condition arising entirely after year-end
Example: A factory fire in January
The same calendar-year entity's main manufacturing facility is destroyed by a fire on January 25, an event entirely unrelated to any condition existing at December 31.
Since the fire – and the resulting loss – arose ENTIRELY after the balance sheet date, with NO condition existing at December 31, this is a TYPE II event. The entity does NOT adjust its December 31 financial statements for this loss, but given its likely material significance, must DISCLOSE the nature of the event and an estimate of its financial effect (or a statement that such an estimate cannot yet be made).
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Disclosure Requirements
What ASC 855 requires
The date through which subsequent events were evaluated, and whether that represents the issuance date or the date available to be issuedNature of material Type II events and an estimate of their financial effect, or a statement that an estimate cannot be madeFor revised financial statements, the circumstances requiring revision and the date through which subsequent events were re-evaluated
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether an event's underlying condition existed at the balance sheet date (Type I) or arose afterward (Type II)Whether a Type II event is significant enough that nondisclosure would be misleading
SIGNIFICANT ESTIMATES
Estimated financial effect of a disclosed Type II event, where reasonably estimable
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ASC 855 vs IAS 10 – Comprehensive Comparison
Comparison – ASC 855 vs IAS 10
FeatureUS GAAP (ASC 855)IFRS (IAS 10)
Terminology for Type I / Type IIType I (recognized) / Type II (non-recognized)ADJUSTING events / NON-ADJUSTING events – same substance, different labels
Core adjust-vs-disclose principleCondition existed at balance sheet date → adjust; arose after → disclose onlySame core principle – converged
Mandatory disclosure of evaluation dateREQUIRED, with the specific "issued vs available to be issued" two-tier distinctionAuthorisation-for-issue date disclosed, but WITHOUT the same prescriptive two-tier "issued vs available to be issued" construct
The underlying adjust-vs-disclose principle is genuinely converged – the more prescriptive US GAAP-specific element is the mandated two-tier evaluation-date disclosure construct itself, which doesn't have a precisely matching structure under IAS 10.
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Statement Mapping
Where every ASC 855 event lands
EventStatement(s) affectedNotes
Type I eventBS ISFinancial statements adjusted to reflect the condition existing at balance sheet date
Type II eventNotes onlyNo adjustment; disclosed if material
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Related Topics
Cross-reference map
TopicConnection
ASC 250Governs restatements, which may intersect with reissued financial statement subsequent event reevaluation
ASC 450Contingencies – often supplies the recognition/measurement framework for Type I loss contingency adjustments
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Quick-Reference Glossary
Type I (recognized) subsequent event
An event providing additional evidence about conditions that existed at the balance sheet date, requiring adjustment of the financial statements.
Type II (non-recognized) subsequent event
An event whose underlying condition arose after the balance sheet date, not requiring adjustment but potentially requiring disclosure.
Available to be issued
The date financial statements are complete in a form that complies with GAAP and all necessary approvals for issuance have been obtained, relevant for entities other than SEC filers.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows