Note: This article is based on information available as of January 2026. For the most current guidance, consult the official GASB website or your professional advisor.
On December 17, 2025, the Governmental Accounting Standards Board (GASB) released GASB Statement No. 105, Subsequent Events (GASB 105 or Statement), providing guidance on financial reporting for subsequent events. This article summarizes the key requirements and offers practical examples for government financial professionals.
History and Background
The Role of the GASB
The GASB was established in 1984 as an independent, private-sector organization to develop accounting and financial reporting standards for U.S. state and local governments. GASB’s mission is to promote clear, consistent, and comparable financial reporting, thereby increasing transparency and accountability for public sector entities.
Why This Statement?
The GASB issued GASB 105 to improve financial reporting requirements for subsequent events, thereby enhancing consistency in their application and better meeting the information needs of financial statement users. Prior guidance for subsequent events found in GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards (GASB 56), as amended, was based on the AICPA’s auditing standards for subsequent events. Research by the GASB identified challenges in understanding and applying GASB 56, including confusion over recognized vs. nonrecognized events and inconsistent note disclosures.
Key Elements of GASB 105
GASB 105 defines subsequent events as transactions or other events that occur after the date of the financial statements but before the date the financial statements are available to be issued. This period is referred to as the subsequent events time frame. The date the financial statements are available to be issued is defined as the date at which (a) the financial statements are complete in a form and format that complies with GAAP, and (b) approvals necessary for issuance have been obtained.
| Term | Definition |
| Subsequent events | Transactions or other events that occur after the date of the financial statements but before the date the financial statements are available to be issued |
| Subsequent events time frame | Period of time after the date of the financial statements and before the date the financial statements are available to be issued |
Why It Matters
Knowledge of subsequent events is essential for financial statement users to make informed decisions. Furthermore, consistent identification, recognition, and disclosure of subsequent events will reduce diversity in practice, better meet the needs of financial statement users, and aid in audit readiness and risk management.
Types of Subsequent Events
GASB 105 requires that subsequent events be classified as either recognized or nonrecognized events.
Recognized Events
A recognized event is a subsequent event that provides evidence of conditions that existed at the financial statement date that inform accounting estimates reported as of the financial statement date.
A government-owned airport authority has a fiscal year-end of September 30. The airport authority levies a passenger facility charge for each passenger departing from the airport. On November 1, a major airline operating at the airport declared bankruptcy and ceased operations. As of November 1, the airport authority’s financial statements were not available to be issued. The bankruptcy may be indicative of the airline’s failing financial conditions as of the financial statement date. Because the airline’s financial difficulties likely existed as of the reporting date, the event is recognized in the allowance calculation as of September 30.
Nonrecognized Events
A nonrecognized event is a subsequent event that results in either a significant effect that is recognized or disclosed in the basic financial statements in the reporting period in which the event occurs and is one of the following:
- A debt-related transaction, other than regular debt service payments
- A government combination or disposal of government operations
- A change to the legally separate entities that compose the financial reporting entity
- A transaction or other event that is of such a nature that disclosure of the event is essential to a financial statement user’s analysis for making decisions or assessing accountability
A nonrecognized event is different than a recognized event in that a nonrecognized event does not inform conditions that existed at the financial statement date. As such, the effects of a nonrecognized event should not be incorporated into the amounts reported at the financial statement date but instead disclosed in the notes to the financial statements. The notes should include a description of the nonrecognized event and its effect, and an estimate of the amount of the effect. If an estimate of the amount cannot be made, the notes should include the reason why.
The county government has a fiscal year-end of June 30. The county issues general obligation bonds during the subsequent event time frame on July 25. The issuance of the bonds does not inform conditions that existed as of the financial statement date (June 30). Because the bond issuance occurred after the reporting date and does not reflect prior conditions, it is only disclosed in the notes to the financial statements.
Why It Matters
Classification of subsequent events as either recognized or nonrecognized makes sure that the amounts dependent upon accounting estimates reported in the basic financial statements as of the financial statement date appropriately reflect all known information prior to the date the financial statements are available to be issued. Moreover, subsequent events that do not inform on conditions as of the financial statement date that however result in a significant effect in the reporting period in which they occur are still important to disclose and communicate to financial statement users.
Subsequent Event Evaluation Date
The notes to the financial statements should disclose the date through which subsequent events have been evaluated regardless of whether there is a recognized event or a nonrecognized event.
Why It Matters
Disclosing to the financial statement users the date through which subsequent events have been evaluated allows the financial statement users to understand the timeframe in which certain events are either reflected in the accounting estimates used in preparing the financial statement amounts or included in the note disclosures.
Finance teams should establish clear procedures for documenting the evaluation date to support audit trails.
Illustrative Examples
Recognized Event
The City of Alpha has a fiscal year-end of June 30. On August 12, the City was notified that a large property developer who owes the City delinquent property taxes and utility assessments had filed for bankruptcy. As of August 12, the City’s basic financial statements were not available to be issued. The City’s finance department applied their professional judgment in evaluating the facts and circumstances of the property developer’s bankruptcy filing, which included communications with the developer and review of financial records and concluded that the property developer’s adverse financial conditions existed as of June 30. As a result, the City concluded that the City’s allowances for uncollectable property taxes and uncollectible utility assessments as of June 30 should incorporate the property developer’s bankruptcy into the measurement.
Professional judgment plays a crucial role in determining if a subsequent event is indicative of financial conditions as of the financial statement date. Finance leaders should always document their reasoning and considerations.
Nonrecognized Event
Another large taxpayer of the City of Alpha suffered significant property damage and an interruption to their operations as a result of a tornado on July 26. Subsequent to July 26, the taxpayer informed the City that they are unlikely to pay their outstanding property tax receivable. The City’s finance department concluded the tornado occurred during the subsequent events time frame and was not indicative of conditions at the financial statement date. As such, the events of the tornado are not incorporated into the measurement of the City’s allowance for uncollectible taxes. The City does however consider the event to be of the nature that disclosure is essential to a financial statement user’s analysis for making decisions or assessing accountability. Accordingly, the City included a description of the event, the effect, and an estimate of the amount of the effect in the notes to the financial statements.
Finance leaders should consider qualitative and quantitative criteria when assessing the significance of a subsequent event.
Recognized Event
Bravo County has a fiscal year-end of June 30. On August 22, the County received its landfill closure cost study from the County’s contracted engineering firm. The County’s financial statements were not available to be issued. The study covered three new landfill cells that were not included in the prior closure cost estimate but were open and accepting waste as of June 30. The County’s accounting department concluded the cost study reflected the conditions of the landfill as of June 30. As a result, the County incorporated the results of the study into the County’s landfill closure cost estimate as of June 30.
Finance leaders should look to other departments to help identify subsequent events.
Nonrecognized Event
Legislation passed on July 15 and effective October 1 requires landfill operators to install newly designed leachate liners and ground water monitoring devices not currently present at Bravo County’s landfill. The costs associated with improving the landfill to comply with the new legislation are material to the County’s landfill enterprise fund. The County’s accounting department concluded the costs associated with the landfill improvements necessary to comply with the new legislation will need to be incorporated into the County’s landfill closure cost estimate; however, the legislation did not exist at the financial statement date. Accordingly, the costs should not be included in the measurement of the landfill closure cost as of June 30. The County does however consider the event to be of the nature that disclosure is essential to a financial statement user’s analysis for making decisions or assessing accountability. Accordingly, the County included a description of the event, the effect, and an estimate of the amount of the effect in the notes to the financial statements.
Finance leaders should still estimate the amount of the effect of a nonrecognized event and include the amount as a disclosure in the financial statements.
Effective Date and Transition
GASB 105 is effective for fiscal years beginning after June 15, 2026, and all reporting periods thereafter. The requirements of GASB 105 should be applied prospectively (i.e., on a go-forward basis) at transition. Early application is encouraged.
How BDO Can Help
GASB 105 provides clarity over which transactions or other events should be treated as subsequent events and what the recognition and disclosure requirements are. Finance leaders should take appropriate action to achieve successful implementation, including the following action steps:
- Make sure staff is aware of the requirements of GASB 105 and is provided the necessary training.
- Assess current processes for identification and evaluation of transactions or other events occurring during the subsequent events time frame.
- Make necessary modifications to processes and internal controls to allow for subsequent events to be appropriately identified and evaluated. This includes but is not limited to:
- Establishing or revising controls over the identification and evaluation of subsequent events
- Developing a process for determining whether a transaction or other event informs accounting estimates reported at the financial statement date (i.e., whether the criteria for a recognized event is met)
- Reviewing the processes used for accounting estimates to make sure recognized events are considered
- Creating a process for estimating the amount of the effect of a nonrecognized event
- Update financial statement templates so that the required subsequent event note disclosures are included.
- Inform other leaders in the government and those charged with governance of the new requirements and how the changes should improve financial reporting and aid in audit readiness and risk management.
BDO’s State and Local Government practice helps governments and communities thrive. Contact us to learn how we can support you in preparing for the implementation of GASB 105.
For more information on our service offerings, visit bdo.com/governments.
Related Reference Material
- Governmental Accounting Standards Board. (2025). GASB Statement No. 105, Subsequent Events. Norwalk, CT: GASB.