What is Subsequent Events Accounting?
Subsequent events are material events that occur between the balance sheet date and the date the financial statements are authorized for issue. Accounting standards require companies to either adjust the figures or disclose the event, depending on whether it relates to conditions that existed at the reporting date.
How It Works
- Identify events between period-end and statement issue date.
- Classify each as adjusting (existing condition) or non-adjusting (new condition).
- Adjust the financial statements for adjusting events; disclose non-adjusting events in the notes.
Saudi Context
Saudi listed companies report under IFRS as adopted by SOCPA, which applies IAS 10. The CMA expects timely disclosure of material subsequent events such as major contracts, regulatory penalties, or natural disasters in the period between fiscal year-end and audit sign-off.
Example
A Saudi contractor’s customer files for bankruptcy two weeks after 31 December. Because the customer’s distress existed at year-end, the receivable is impaired in the current-year statements (adjusting event).