A subsequent event is something that happened after the balance sheet date but before the Annual Report was released to the public.

The reason it’s important for the Annual Report itself is the significance of the event. A subsequent event isn’t for an example you buying goods or collecting your receivables – it’s your everyday business transactions and they are to be expected to be happening. 

Something that’s not expected to be happening is those not everyday business transactions or events, i.e. a considerable theft in your warehouse or opening a new production line or a new store.  Those are new events and furthermore, they carry importance when it comes to the business as a whole. Imagine that the financial year ends at December 31; the Annual Report is released at May 31. Wouldn’t you want to know if anything important happened during the 5-month period? It’s almost half a financial year! Those are the subsequent events that in one way or the other have significant affect on the business.

What you’d want to disclose about the events is as follows:

• What exactly happened (very briefly)?
• How will this affect the future of the company?
• What impact if any will it have on the financial statements (i.e. increased efficiency etc)?

Subsequent events are something to be not detailed about necessarily, but above all making the note and disclosing them at least briefly for the users so they could make their decisions based on the most updated information (think about the 5-month period we referred to above).