Question

what is it meant by the term "subsequent event"

How is a subsequent event treated in an entity's financial reports?

Give an example of something that would be a subsequent event.

Answer 1

What is it meant by the term "subsequent event"?

“Subsequent events” are the events that occur after the period end of the company’s financials but before the publishing of financial statements. For example, a company’s reporting period is of 12 months and runs from January 1 2015 to December 31 2015. If the company publishes its financial statement on 28^th February 2016, then events that occur from 1^st January 2016 to 27^th February 2016 will be considered as subsequent events.

How is a subsequent event treated in an entity's financial reports?

“Subsequent events” can be of adjusting events or non-adjusting events. Adjusting events are related to events that provide additional information about the conditions that existed on the balance sheet date and might require adjustments to the financial statements. Non-adjusting events are related to events that provides new information about the conditions that did not exist on the balance sheet date.

Give an example of something that would be a subsequent event?

Example of a subsequent event would be a labor strike that could potentially impact the company and might push it to in bankruptcy should be disclosed in the financial statements.