Events occurring after the close of the period that could have a significant effect on the entity's financial position must be disclosed in the entity's financial statements.

Events occurring after the close of the period that could have a significant effect on the entity's financial position must be disclosed in the entity's financial statements.

• A. False
• B. It is only for publicly traded companies
• C. True
• D. Only if material

Answer: (C)

Subsequent events after the reporting date can change how readers interpret the financial position, so material ones must be disclosed. The rules separate events into those that provide evidence about conditions that existed at the balance sheet date (adjusting events, which require adjusting the financial statements) and those that reflect conditions arising after the period (non-adjusting events, which don’t change the numbers but must be disclosed if material). Because material post-period events help users understand the true financial standing, such disclosures are required.

Subsequent events after the reporting date can change how readers interpret the financial position, so material ones must be disclosed. The rules separate events into those that provide evidence about conditions that existed at the balance sheet date (adjusting events, which require adjusting the financial statements) and those that reflect conditions arising after the period (non-adjusting events, which don’t change the numbers but must be disclosed if material). Because material post-period events help users understand the true financial standing, such disclosures are required.