The Governmental Accounting Standards Board added a project to its technical agenda to deal with issues related to subsequent events for state and local governments.
The project will take a closer look at the existing requirements in GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, GASB announced Thursday, and see if there are ways to enhance the accounting and financial reporting for subsequent events. A subsequent event happens outside the reporting period but occurs before financial statements are issued. Depending on the situation, it may need to be disclosed.
GASB staffers found when doing pre-agenda research that subsequent events and related issues are fairly prevalent among state and local governments. They identified a number of inconsistencies and misreporting practices in the accounting and financial reporting for subsequent events. Guidance on subsequent events in Statement 56 dates back over five decades to audit literature from 1972 and hasn’t been fully evaluated for its effectiveness or consistency with GASB’s conceptual framework.
Courtesy of GASB
The board decided to add a project to the technical agenda focusing on subsequent events after evaluating the staff’s research findings and taking into account the level of interest from the GASB’s Governmental Accounting Standards Advisory Council, which ranked the project high on the list during its annual project prioritization.
The reexamination will cover issues identified in the pre-agenda research, including confusion about and challenges associated with applying the existing standards for subsequent events, inconsistency in practice in the information provided about subsequent events, and the usefulness of the information about subsequent events, with the aim of clarifying how subsequent events are defined and what information should be given. The project will also weigh relationships with some of GASB’s other standards and projects when it comes to transactions or other events that happen after the financial statement date.
