An event (e.g., a transaction, business or financial) that takes place after the end or close of the accounting/ reporting period (e.g., year-end, quarter-end, etc.) and before the financial statement for that period have been finalized and issued. Subsequent events are typically classified in terms of potential effect on the accounting estimates projected in the financial statements (to that end, there are type I and type II events). Type I events affect the entity’s accounting estimates on the books, while type II events aren’t on the books before the closure of the accounting period and therefore have no direct effect on the financial statements at the time. Type II events are usually dubbed “nonrecognized events”, because disclosure of which is made in the notes to financial statements (footnotes, explanatory notes), while there is no practical need to adjust the financial statements.

For financial statements under audit, a letter of representations, carrying the date of the auditor’s report, shall be provided to independent auditors articulating whether any events occurred subsequent to the date of the financial statements, in the management’s opinion, would require adjustment or disclosure in these statements.

Examples of subsequent events (type II) include the sale of a business or a bond, or the issue of capital stock .