SFAS 165 Establishes Accounting Standards for Reporting Subsequent Events
| Abbreviations Key |
| FASB: Financial Accounting Standards Board |
| SFAS 165: Statement of Financial Accounting Standards No. 165, Subsequent Events |
| U.S. GAAP: U.S. generally accepted accounting principles |
To establish standards for reporting events that occur after the balance sheet date, but before financial statements are issued or are available to be issued, FASB released SFAS 165 on May 28, 2009. The statement is effective for interim and annual periods ending after June 15, 2009.
The statement defines:
- The period after the balance sheet date during which a reporting entity’s management 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 an entity should make about events or transactions that occurred after the balance sheet date
Why was SFAS 165 issued?
In conjunction with its efforts to codify all authoritative U.S. accounting guidance in one place, FASB undertook a project to incorporate accounting guidance related to subsequent events that originated in auditing standards. According to Mike Westervelt, assurance and accounting manager with LarsonAllen, it is expected that FASB will incorporate this standard into topic 855 of the FASB Accounting Standards Codification.
How does this statement change current practice?
SFAS 165 does not significantly change the subsequent events an entity reports—either through recognition or disclosure—in its financial statements.
“Issuance of the statement emphasizes that accounting and reporting is the responsibility of an entity’s management, not its auditor,” Westervelt says.
SFAS 165 introduces the concept of statements being available to be issued. It requires 1) disclosure of the date through which an entity has evaluated subsequent events and 2) the basis of the date, meaning whether that date represents the date the financial statements were issued or were available to be issued. This disclosure informs users of the financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented.
How does issued differ from available to be issued?
Financial statements are considered available to be issued when they 1) are complete in a form and format that complies with U.S. GAAP and 2) have all approvals (such as management, the board of directors, or significant shareholders) necessary for issuance.
An entity currently expecting to widely distribute the financial statements, including a public entity as defined in the standard, is required to evaluate subsequent events through the date of issuance. Other entities must evaluate subsequent events through the date the financial statements are available to be issued.
Prepare to implement the standard
- Monitor events and transactions after your year-end that may require recognition or disclosure.
- Add the new required disclosure to your financial statements. A sentence such as the following may be appropriate:
"In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through [insert date], the date the financial statements were [available to be issued] OR [issued].”
For more information,
contact us or
access the standard.