FAR 2_03

  1. What is a recognized subsequent event?
    Events regarding additional information that occur about conditions that existed at the balance sheet date
  2. How are recognized subsequent events handled?
    A recognized subsequent event must adjust the financial statements (provide a journal entry) AND disclose
  3. What is the timeframe for which subsequent events must be recognized?
    Up to the date the financial statement are issued (public companies) or are available to be issued (non-public companies)
  4. True / False: Settlement of litigation that originated after the balance sheet date, but within the timeframe for subsequent events must adjust the financial statements and provide disclosure
    • False
    • Disclosure is required, but since it didn’t originate before the Balance Sheet date, no adjustment should be made.
  5. True / False: A customer with a good track record of payment goes bankrupt within the subsequent event period. This event requires adjustment of the financial statements and disclosure.
    • False
    • The customer was expected to pay. Disclosure may be required, but not an adjustment.
  6. What is a nonrecognized subsequent event?
    Significant events that occur during the subsequent event review period, but whose conditions did not exist as of the balance sheet date.
  7. How are nonrecognized subsequent events handled?
    • Disclosure is necessary to keep the financial statements from being misleading
    • Disclosure should include the nature of the subsequent event and an estimate of the financial effect or a statement that no estimate can be made.
  8. True / False: A public company must disclose the date through which subsequent events have been evaluated.
    • False
    • A non-public company must provide this disclosure, but a public company does not.
  9. True / False: An entity reissues its financial statements. According to GAAP, the subsequent event date must be extended to the reissuance date.
    • False
    • Events that occur after the original issue are not recognized
  10. True / False: A company discovers an error in the financial statement after their original issuance. The company corrects the error and reissues the statements. The subsequent event date must extend to the date the corrected statements were issued.
    • False
    • This is still considered a reissuance and the subsequent events are only evaluated to the original issue date.
  11. True / False: A customer who has significant past-due accounts goes bankrupt within the subsequent event period. This event requires adjustment of the financial statements and disclosure.
    True
Author
BethM
ID
337731
Card Set
FAR 2_03
Description
Becker Review 2018
Updated