GASB has released a new standard—Statement No. 105, Subsequent Events—and it’s something every local government should have on its radar as year‑end reporting approaches. While governments have long been required to evaluate events that occur after the financial statement date, this new guidance sharpens the definitions, strengthens disclosure expectations, and aims to eliminate inconsistencies that often created confusion for both preparers and users.
What is GASB 105: The Key Change
At its core, GASB 105 focuses on tightening the window in which governments must evaluate subsequent events. The Statement now clearly defines this period as beginning on the financial statement date and ending on the date the financial statements are available to be issued. That definition is important: the statements must be fully GAAP‑compliant, and the necessary approvals must be in place. To keep things transparent, governments will now need to disclose the specific date through which they evaluated subsequent events—something that wasn’t always handled consistently in practice.
One area where the new standard adds meaningful clarity is the distinction between events that should affect the numbers on your financial statements and those that should simply be disclosed. GASB 105 explains that recognized events are those that provide additional evidence about conditions that already existed at year‑end. For example, if a major customer files for bankruptcy shortly after year‑end, and the facts suggest financial trouble was already present, that information must be reflected in your reported amounts.
Recognized vs. Nonrecognized Subsequent Events
On the flip side, nonrecognized events are those that arise after the financial statement date and don’t speak to prior conditions but still matter to financial statement users. GASB gives several examples that will be familiar to many local governments: debt‑related transactions, government combinations or disposals of operations, and changes in the entities that make up the reporting unit. These events don’t change your year‑end numbers, but they do require disclosure—along with an explanation of the event’s effect, or an explanation of why the impact can’t yet be estimated.
From a practical standpoint, GASB believes most governments already provide much of this information. What the new standard does is bring a more consistent structure to how these disclosures are identified, evaluated, and communicated. For finance officers, auditors, and governing bodies, that should translate to fewer gray areas and fewer debates about what belongs in the notes.
GASB 105 Effective Date and Implementation
The Statement becomes effective for fiscal years beginning after June 15, 2026, though early adoption is allowed. Implementation is prospective, meaning prior periods won’t need to be restated—a welcome accommodation for teams already facing heavy reporting workloads.
Key Takeaways for Local Governments
Overall, GASB 105 is designed to enhance transparency without adding unnecessary burden. For local governments, the biggest shifts will involve confirming the proper “available to be issued” date, documenting subsequent‑event evaluations more deliberately, and ensuring disclosures hit the new clarity and completeness thresholds. With these refinements, users—from council members to citizens to creditors—should gain a clearer view of events that can meaningfully shape a government’s financial position.
If you have questions about how GASB 105 applies to your agency (or want support creating a smoother year-end workflow), connect with the LSL government team—we’re happy to help. Contact us today!
