Statements that took place after the data in a balance sheet and before the financial statements are issued to public entities

Statements that took place after the data in a balance sheet and before the financial
statements are issued to public entities. The data of the financial information will be available to be
issued to the non-public entities. The financial statements are issued widely and the distribution
of general use. The documents that are known to be given consist of all the approvals requested to be
published. There are two categories of subsequent events. The first type is for the recognized
following circumstances, and the other class is for non-recognized subsequent events. The
recognized subsequent events will provide evidence of all the conditions in existence up to the
balance sheet data. The non-recognized events will give evidence of diseases that were not, in
fact, at the time of the date indicated on the balance sheet. Two effects will arise from
recognition. Recognition of the subsequent events will lead to the glory of financial statements.
The impact of non-recognition of the following events will result in the non-recognition of
financial statements. The disclosure can only take place on two dates. On the first date, there is a
need to evaluate the events, and for the second date, the financial statements will be issued, and
if not, they need to be available to be published.
Should the information pertaining to actual claims incurred as of the balance sheet date
that became available after the balance sheet date be considered in determining
management’s best estimate of the medical benefits payable? If so, what impact does this
information have on the amount recognized or disclosed?
The information about the actual claims incurred according to BS time needs to be
considered so that the management can have the most appropriate estimate of the medical gains.
The strategy is likely to increase the medical benefit by approximately 0.75% Mn, and there will
be a decrease in the medical help that is payable by roughly $0.75 Mn. The company is a private

CASE 12-2 3
entity, and there were several accruals that the company needs to recognize if they are
recognized or disclosed as of December 31, 2011. The most vital thing to focus on is are the
subsequent events at the time and if they affect or influence the material or not so that an
informed decision can be made.
How, if at all, is the modification to the line of credit recognized or disclosed in the financial
statements?
The modifications that will be made on the line of credit is an event which is non-
recognized. There is a need to disclose still the changes in their line of credit in the FS. There is a
need to tell the event because if the disclosure does not take place, it will make the FS wrong.
Thus, all the modifications that are in line with the credit need to be disclosed as subsequent
events. But since the condition for change is not in existence at the data indicated in the balance
sheet, there is no need to recognize the event. Modifications of the LOC will need to take place
in the noted accounts. According to ASC 470-50-4—21B, any modifications towards the line of
credit or that will result in changes will result in creating a new line of credit or a debt that is
revolving. The action can also result in a traditional term debt arrangement that needs to follow a
procedure in evaluation.
If the borrowing capacity that results from the new arrangement is larger or equal to the
power of lending in the older account, there is a need to create an association with the new
format. The association is from the unamortized deferred expenses, all the amounts paid to the
creditors, and any cost incurred by a third party. Also, according to ASC 855-10-25-3, an entity
will not recognize the subsequent events that give evidence on a condition that was not in
existence up to the data indicated in the balance sheet.

CASE 12-2 4
How, if at all, is the acquisition of Hamlet recognized or disclosed in the financial
statements?
Shakespeare will need to disclose all the acquisitions of Hamlet since the acquisition date
is March 10. The years 2011 is way before the financial statement’s issue date, which is March
20, 2011. The assumption is that the extra credit that Shakespeare will receive will be
immediately used towards the acquisition process. The belief is that the premise is fair. The
acquisition of the company is not made, and the process is still under discussion. The
management of the company has reached no agreement. Equally, the condition was not available
on the present day of the balance sheet, and thus, it will not be recognized and one of the events.
The company’s plan for the acquisition will need to be disclosed in the notes of the accounts,
together with all the withdrawal that takes place in the funds that are within the modified LOC.
More so, there is a need to states that the agreement made is not complete and it is pending in
addition to the final pricing.
The management of Shakespeare uses $10 million from the line of credit, which has
undergone modification so that they can acquire Hamlet. The best allocation by managing the
$10 million in the process is as follows $2 million towards the current assets and $8 million
towards the noncurrent investments. Out of the $8 million, $5 million is towards noncurrent
purchases that they can identify, $2 million towards the intangible assets, and $1 million for the
goodwill.
What should Shakespeare state in its disclosure regarding the date through which the
financial statements were evaluated for subsequent events? How would this disclosure
change if Shakespeare were an SEC filer?

CASE 12-2 5
Shakespeare is not an SEC filer or a conduit for the bong obligor. Thus, there is a need to
evaluate the subsequent events from the dates that the financial statements will be made
available. Equally, ASC 85510501 suggests that Shakespeare needs to provide a disclosure of
data on March 18, 2011, as the date in which the subsequent events’ evaluation took place. Also,
it is the same date that the financial statements will be available to be issued. The idea that
Shakespeare is not an SEC filler, the disclosure’s expected date will be March 18. The date will
be extended up to the date when evaluating all the other events. On the other hand, the situation
would have been different if the company was an SEC filer. The date for disclosure would be
March 20. The date is when the fiscal documents are issues of made available to be issued. The
extension of the date will be up to when the other events undergo an evaluation.
Shakespeare is contemplating adopting IFRSs in the coming year. What guidance in IFRSs
addresses events that occur after the balance sheet date but before the financial statements are
issued? What does this guidance state regarding the recognition, measurement, or disclosure of
such events?
If Shakespeare was to adopt IFRSs events, subsequently, the evaluation should occur
through March 20, 2011. According to IAS 10, the review of the following circumstances should
appear on the date through which there was authorization for the financial documents. Based on
an entity’s corporate governance and the regulatory requirements, the commission may either be
from the management or the board of directors. The plan that is in the organization is for
Shakespeare to issues the financial statements on March 20, 2011. The understanding is that
there is an authorization for use. IAS 10 equally states that an event in the process of a
subsequent event will be a source of additional evidence of the conditions present in the balance
sheet. The outcomes will be to have an adjustment taking place in the balance sheet. A company

CASE 12-2 6
needs to update the entire disclosures. The focus should be on including new information that is
present after the date of reporting has passed.
All the events between the period of the balance sheet and the date of the financial
statements have gone through the authorization process, and they need to be considered. The
categorization will be adjusting events and non-adjusting events. The adjusting events will
provide additional evidence to an already existing event that already had an existing balance
sheet condition. Such includes events that show the assumption of the going concerns are not
relevant. For such circumstances, there is a need to make adjustments where possible. The non-
adjusting events are those that are indicative of the event, which is presented after the date on the
balance sheet. The condition for such events is not shown on the date of the balance sheet. The
financial statements will not require any adjustments. However, if the words affect the evaluation
process, there is a need for disclosure. The disclosure will be on the nature of the event, an
estimation of the fiscal impact, and a statement that the estimate cannot attain. If the going
issues come up after the reporting period has passed, all the financials will need to be adjusted.
The company is not in a position to create all financials that are within the going concern
assumptions that are within the case. If Shakespeare was to adopt IFRSs events, subsequently,
the evaluation should occur through March 20, 2011. According to IAS 10, the review of the
following circumstances should take place on the date through which there was authorization for
the issue of the financial documents.
Based on an entity’s corporate governance and the regulatory requirements, the
authorization may either be from the management or the board of directors. The plan that is in
the organization is for Shakespeare to issues the financial statements on March 20, 2011. The
understanding is that there is an authorization for use. IAS 10 equally states that an event in the

CASE 12-2 7
process of a subsequent event will be a source of additional evidence of the conditions present in
the balance sheet. The outcomes will be to have an adjustment taking place in the balance sheet.
A company needs to update the entire disclosures. The focus should be on including new
information that is present after the date of reporting has passed.
All the events between the period of the balance sheet and the date of the financial
statements have gone through the authorization process, and they need to be considered. The
categorization will be adjusting events and non-adjusting events. The adjusting events will
provide additional evidence to an already existing event that already had an existing balance
sheet condition. Such includes events that show the assumption of the going concern is not
relevant. For such circumstances, there is a need to make adjustments where possible. The non-
adjusting events are those that are indicative of the event, which is presented after the date on the
balance sheet. The condition for such events is not shown on the date of the balance sheet. The
financial statements will not require any adjustments. However, if the words affect the evaluation
process, there is a need for disclosure. The disclosure will be on the nature of the event, an
estimation of the fiscal impact, and a statement that the estimate cannot attain. If the going
issues come up after the reporting period has passed, all the financials will need to be adjusted.
The company is not in a position to create all financials that are within the going concern
assumptions that are within the case.

CASE 12-2 8

References

ASC 855, Subsequent Events (ASC 855) (formerly FASB Statement No. 165, Subsequent
Events (Statement 165))
ASC 855-10, Subsequent Events: Overall (ASC 855-10)
ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements (ASU
2010-09)
AICPA Statement on Auditing Standards Section 560, Subsequent Events (AU Section
560)
IAS 10, Events After the Reporting Period (IAS 10)