New Rules Governing Subsequent Events Mark Schultz from Dugan & Lopatka is a member of the Technical Issues Committee of the American Institute of Certified Public Accountants.  Recently he reviewed the new rules governing the general accounting standards of accounting for and disclosure of subsequent events.  Subsequent events are events that occur after the Statement of Position/Balance Sheet date but before financial statements are issued or are available to be issued.  This new ruling affects full disclosure financial statements (annual or interim) with periods ending on or after June 15, 2009.   

In general, it does not change the way management or the outside auditors consider and handle subsequent events, which is covered by previous accounting standards.  Under the new rules, management is responsible to consider these events and disclose in the footnotes “the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.” 

The objective of the new rules is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, the new rules set forth:

• The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements
• The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements
• The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

The new rules do not apply to subsequent events or transactions that are within the scope of other applicable generally accepted accounting principles (GAAP) that provide different guidance on the accounting treatment for subsequent events or transactions. The new rules apply to both interim financial statements and annual financial statements.