GASB 105: Subsequent Events Reporting for Government

GASB Standards

Scope & Methodology: This article is based on publicly available sources including the GASB official summary and press release (December 17, 2025), Cherry Bekaert guidance (February 2026), CPA Practice Advisor coverage (December 17, 2025), and BKC CPAs analysis (February 2026). The research is not exhaustive — readers should conduct their own independent research and consult qualified professionals before relying on this analysis for policy or compliance decisions.

GASB 105: Subsequent Events Reporting for Government Entities

Executive Overview

The Governmental Accounting Standards Board issued Statement No. 105, Subsequent Events, on December 17, 2025. GASB 105 establishes government-specific definitions and requirements for evaluating, recognizing, and disclosing subsequent events in financial statements. The standard is effective for fiscal years beginning after June 15, 2026, with earlier application encouraged.

GASB 105 fills a longstanding gap in governmental accounting standards by providing a dedicated framework for subsequent events — an area where state and local governments previously relied on a combination of professional judgment and guidance borrowed from private-sector standards.

What Are Subsequent Events Under GASB 105?

GASB 105 defines subsequent events as events or transactions that occur after the date of the financial statements but before the financial statements are issued or are available to be issued. This evaluation window — bounded by the financial statement date and the issuance or availability date — is central to how governments must assess and report post-year-end developments.

The standard establishes two categories of subsequent events:

Recognized subsequent events provide additional evidence about conditions that existed at the financial statement date. These events affect the measurement of amounts reported in the financial statements and require adjustment. For example, if a government's largest taxpayer was already experiencing financial distress during the fiscal year and files for bankruptcy shortly after year-end, the bankruptcy provides additional evidence of a condition that existed at the statement date — triggering recognition and potential adjustment of receivable balances.

Nonrecognized subsequent events provide evidence about conditions that arose after the financial statement date. These events do not require adjustment to financial statement amounts but may require disclosure in the notes if they are of such a nature that disclosure is necessary to prevent the financial statements from being misleading. A major employer announcing a facility closure after year-end — when the employer was in stable financial condition at the statement date — would be a nonrecognized event potentially requiring note disclosure.

Key Requirements

GASB 105 introduces several specific requirements for government entities:

Evaluation period disclosure. Governments must disclose the date through which subsequent events have been evaluated. This is a notable addition — prior to GASB 105, there was no explicit GASB requirement to disclose this evaluation date, even though it is standard practice in private-sector accounting under FASB ASC 855.

Recognition criteria. Events that provide additional evidence about conditions existing at the financial statement date must be recognized — meaning the financial statements themselves are adjusted. The standard requires governments to evaluate whether the underlying condition existed at the statement date, not merely whether the event occurred nearby in time.

Disclosure requirements for nonrecognized events. For events that arise after the statement date, GASB 105 requires disclosure of the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made and the reasons why. The standard does not define "significant" precisely, intentionally allowing professional judgment in determining which nonrecognized events warrant disclosure.

Practical Examples

Example 1: Recognized Event — Taxpayer Bankruptcy A government's largest property taxpayer files for bankruptcy on July 15, after the June 30 fiscal year-end. Investigation reveals the taxpayer had missed loan payments and faced covenant violations throughout the fiscal year. Because the financial distress existed at the statement date, the government should recognize an adjustment — such as an allowance for doubtful accounts — in the June 30 financial statements.

Example 2: Nonrecognized Event Requiring Disclosure On August 10, a major employer announces a facility closure effective the following year, with 500 or more job losses expected. The employer was in stable financial condition at June 30, and the closure decision was made after year-end. Under GASB 105, this is a nonrecognized event requiring note disclosure describing the event, estimated job losses, expected tax revenue impacts, and the timing of the closure.

Example 3: No Disclosure Required A routine equipment purchase order is placed on August 1 for a vehicle needed for the next fiscal year. This post-year-end transaction does not affect the June 30 financial statements and would not require disclosure under GASB 105.

Categories of Subsequent Events

Government finance teams should evaluate several common categories:

Debt-related events — Bond issuances, refinancings, or credit rating changes occurring after year-end may require disclosure, particularly if they affect the government's borrowing capacity or debt service obligations.

Litigation settlements — Settlements of disputes that originated before year-end should be evaluated for recognition if they provide additional evidence of conditions at the statement date, or for disclosure if the settlement reflects post-year-end developments.

Disasters and emergencies — Natural disasters, infrastructure failures, or public health emergencies occurring after the statement date but before issuance typically represent nonrecognized events requiring disclosure.

Grant or funding changes — Loss of anticipated grant funding or reductions in state or federal appropriations after the statement date may warrant disclosure if the financial impact is material.

Discovery of fraud or errors — Identification of material misstatements or control breakdowns after year-end may require both adjustment (if the condition existed at year-end) and disclosure.

Implementation Timeline

GASB 105 is effective for fiscal years beginning after June 15, 2026, meaning the first affected fiscal year for most governments will be FY 2027 (July 1, 2026 through June 30, 2027). Earlier application is encouraged.

The standard applies prospectively — governments do not need to restate prior-year financial statements. Potential implementation steps for governments to consider include:

  1. Define the issuance or availability date — Finance directors should establish a formal date, typically when the CFO signs the financial statements or when the governing body approves them. This date defines the end of the evaluation window.

  2. Document evaluation procedures — Develop a checklist or procedure memo identifying which events and circumstances will be evaluated as part of the subsequent events review.

  3. Train finance and audit staff — Both internal finance teams and external auditors should be trained on the new GASB 105 framework, particularly the distinction between recognized and nonrecognized events.

  4. Coordinate with auditors — External auditors have responsibility for performing subsequent events procedures through the date of the auditor's report. Coordination on the government's issuance date and evaluation process is essential.

  5. Update note disclosures — Prepare draft footnote language for the evaluation date disclosure and any subsequent events that meet the disclosure threshold.

Relationship to Other Standards

GASB 105 supersedes paragraph 14 of GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, which previously addressed subsequent events for governments by incorporating private-sector auditing guidance. By issuing a standalone standard, GASB has established government-specific definitions and requirements tailored to the public-sector reporting environment.

For many governments, as noted by Cherry Bekaert (February 2026), the practical impact may be modest if they already follow robust subsequent events procedures. However, the explicit evaluation date disclosure requirement and the codification of recognition versus disclosure criteria provide a clearer, more consistent framework.

Common Questions

Q: Do we have to disclose every subsequent event? A: No. Only nonrecognized events that would prevent the financial statements from being misleading require disclosure. Professional judgment is necessary — finance teams should consider user needs, the event's magnitude, and its nature.

Q: What if we cannot estimate the financial effect? A: GASB 105 permits disclosure of the event without a specific estimate, as long as the government explains why an estimate cannot be made. This is common for litigation, disasters, or other events where the full impact remains uncertain.

Q: Does the auditor have responsibility for finding subsequent events? A: Yes. External auditors perform procedures to identify subsequent events through the date of the auditor's report. However, management has initial responsibility for establishing evaluation procedures and identifying events. The auditor then evaluates whether management's process was adequate.

Q: When should we start preparing? A: Although GASB 105 is effective for fiscal years beginning after June 15, 2026, earlier application is encouraged. Governments with June 30 fiscal year-ends should begin updating their procedures during FY 2026 to ensure readiness for FY 2027 reporting.

Key Takeaways

GASB 105 provides the first dedicated governmental accounting standard for subsequent events, replacing guidance previously borrowed from private-sector auditing standards. Government finance teams should review their current subsequent events procedures, establish a formal evaluation date, and prepare updated note disclosures ahead of the FY 2027 effective date. The standard's emphasis on government-specific definitions and requirements reflects GASB's effort to ensure that state and local government financial reporting addresses the unique circumstances of the public sector.

This content was prepared with AI-assisted research using exclusively publicly available sources. No confidential or proprietary data from any client engagement was used. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity. © 2026 DWU Consulting. All rights reserved.

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This article was prepared with AI-assisted research by DWU Consulting. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity.