GASB proposes standard on subsequent events

The Governmental Accounting Standards Board issued an exposure draft Monday of a proposed statement on subsequent events, which are transactions or other events that occur after the date of the financial statements but before the date when financials are available to be issued, along with an exposure draft of a proposed update to its implementation guidance for its other standards for 2025.

One of the main goals of the subsequent events standard is to reexamine the existing requirements in Statement No. 56, "Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards," related to subsequent events and improve the financial reporting requirements for subsequent events. GASB found the guidance was being applied in different ways by various state and local governments. GASB hopes to achieve greater consistency. The updates would clarify the different types of subsequent events, when note disclosures would be required, and the information that would be included in those note disclosures.

The proposed statement defines subsequent events as transactions or other events that occur after the date of the financial reporting statements but before the date the financial statements are available to be issued. The exposure draft describes the date the financial statements are available to be issued as the date at which (1) the financial statements are complete in a form and format that complies with GAAP and (2) all approvals necessary for issuance have been obtained. The proposed statement would clarify the subsequent events that constitute recognized and nonrecognized events and establish specific note disclosure requirements for nonrecognized events.

Courtesy of GASB

Implementation guidance

As for the implementation guide, the proposed guidance takes the form of questions and answers to clarify, explain or elaborate on certain GASB pronouncements. The exposure draft includes nearly 20 proposed new and amended questions and answers that address leases, accounting changes and error corrections, conduit debt obligations, cash flows reporting, compensated absences, and financial reporting model improvements.

GASB periodically issues new and updated guidance to help state and local governments apply GAAP to specific facts and circumstances they encounter. 

GASB is asking for comments on the subsequent events standard by Feb. 21, 2025, and the implementation guidance by Jan. 24, 2025.