Due to the nature of the regulatory process, a reporting entity may receive additional information from its regulator or a final regulatory decision after the end of a reporting period but prior to releasing its financial statements. In those situations, a question arises as to whether the impact of the information or decision should be recorded in the prior period or the period in which it was received. ASC 855, Subsequent Events, provides guidance on the timing of recognition of subsequent events.

The type of subsequent event described in ASC 855-10-25-1 is commonly referred to as a “recognized” subsequent event. In contrast, “nonrecognized” subsequent events provide information about events that did not exist at the balance sheet date and should not be recognized until they occur.

Assessing whether regulatory information or a regulatory decision received after the balance sheet date should be considered a recognized or norecognized subsequent event requires judgment. Some argue that any information from a regulator or a regulator’s decision received after the balance sheet date necessarily relates to conditions that existed at the balance sheet date (except in limited circumstances when the regulatory order addresses a specific event that occurred after the balance sheet date). However, others believe that a regulator’s actions are a discrete event and recognized in the period in which they are received. Both interpretations of the subsequent events literature may be appropriate depending on the circumstances. Reporting entities should evaluate subsequent events as they occur. ASC 855 also requires disclosure of material subsequent events.