Section 3: 25–35%3G
Subsequent Events
Exam insight
Subsequent events are a quick 1-2 MCQ topic, but candidates throw away easy points by confusing the two types. Type 1 (recognized): the condition already existed at the balance sheet date, so you adjust the statements. Type 2 (non-recognized): a new event happened after year-end, so you disclose only. A common trap: a lawsuit settled after year-end for a loss that was already probable at year-end is Type 1, so adjust, don't just disclose. A hurricane that wipes out inventory after year-end is Type 2, a new event, disclose only. The one question that sorts everything: did the condition exist at year-end?
What AICPA wants you to know
- 1Define the subsequent event evaluation period
- 2Distinguish Type 1 (recognized) from Type 2 (non-recognized) subsequent events
- 3Apply the correct accounting treatment to each type
- 4Identify the required disclosure for subsequent events, including the evaluation date
- 5Recognize the difference between SEC registrants and non-public entities for issuance dates
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.