Definition
Post-balance-sheet events, also known as subsequent events, refer to events or transactions that occur after the balance sheet date but before the financial statements are issued or available to be issued. These events may necessitate adjusting the financial statements and disclosures to provide accurate and complete information to financial statement users.
Types of Post-Balance-Sheet Events
- Adjusting Events: Events that provide additional evidence of conditions that existed at the balance sheet date. These events typically require adjustments to the amounts recognized in the financial statements.
- Non-Adjusting Events: Events that are indicative of conditions that arose after the balance sheet date. These events do not necessitate adjustments but may require disclosure in the notes to the financial statements.
Examples
- Adjusting Event: A company determines after the balance sheet date that an asset was impaired at the balance sheet date due to conditions existing at that point, such as discovering a major fraud scheme involving significant parts of the company’s assets.
- Non-Adjusting Event: A company declares dividends after the balance sheet date. Since the decision occurred after the balance sheet date, it does not impact the financial statements for the period ending on that date but might need disclosure in the notes.
Frequently Asked Questions (FAQs)
What are post-balance-sheet events?
Post-balance-sheet events refer to transactions or events that happen after the balance sheet date but before the financial statements are issued. These events can affect the information included in the financial statements and may necessitate adjustments or additional disclosures.
What is the difference between adjusting and non-adjusting events?
- Adjusting events provide evidence of conditions that existed at the balance sheet date. These require adjustments to the financial statements.
- Non-Adjusting events are indicative of conditions that arose after the balance sheet date. These do not require adjustments to the financial statements but may require disclosures.
How are post-balance-sheet events identified?
Post-balance-sheet events are identified by reviewing transactions and events occurring after the balance sheet date up until the date the financial statements are issued or are available to be issued.
Why are post-balance-sheet events important?
They ensure the financial statements reflect all significant conditions and events affecting the entity’s financial position and results of operations, providing a true and fair view to the users of the financial statements.
Related Terms
Adjusting Events: Events occurring after the balance sheet date that provide additional evidence of conditions that existed at the balance sheet date.
Non-Adjusting Events: Events that are indicative of conditions that arose after the balance sheet date and do not require adjustments but may require disclosure.
Online Resources
- IFRS - International Accounting Standards 10 (Events after the Reporting Period)
- FASB - Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 855: Subsequent Events
Suggested Books for Further Studies
- “International Financial Statement Analysis” by Thomas R. Robinson, Hennie van Greuning, Elaine Henry, and Michael A. Broihahn.
- “Accounting Principles” by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso.
Accounting Basics: “Post-Balance-Sheet Events” Fundamentals Quiz
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