Key Takeaways:
- GASB 105 clarifies how governments evaluate and disclose events occurring after the fiscal year-end but before financial statements are issued.
- Governments must classify events as either “recognized” (conditions that existed at year-end) or “non-recognized” (conditions arising after year-end), with disclosures covering the nature and estimated financial effect of each.
- Effective for reporting periods beginning after June 15, 2026, governments should begin preparing by updating policies, training staff, strengthening communications across departments, and enhancing documentation of subsequent event evaluations.
—
The Governmental Accounting Standards Board (GASB) issued Statement No. 105, Subsequent Events, to revise and clarify the disclosure and reporting requirements related to events occurring after the reporting period. While GASB 105 does not fundamentally change how subsequent events are identified, it aligns existing guidance with the GASB conceptual framework and provides clearer definitions and disclosure expectations.
GASB 105 applies to all state and local governments — including general-purpose governments, special districts, utilities, housing authorities, transportation agencies, school districts, and other public sector entities. The standard is effective for reporting periods beginning after June 15, 2026, meaning governments should begin preparing now for implementation.
This article provides an in-depth overview of the standard, its practical implications, and key steps your organization should take before the effective date.
What GASB 105 Changes
GASB 105 replaces the subsequent event guidance previously contained in GASB 56 and introduces clarifications that affect how governments evaluate and disclose events occurring after the measurement date but before financial statements are issued.
1. Alignment With the Conceptual Framework
The standard incorporates definitions and categories of subsequent events directly from GASB Concepts Statement No. 6. This means governments must evaluate subsequent events in two categories:
- Recognized subsequent events: conditions that existed as of the reporting period end.
- Non-recognized subsequent events: conditions that arose after the reporting period.
While these categories are not new, GASB 105 places greater emphasis on the conceptual framework, signaling more consistency in application and more rigorous evaluation.
2. Revised Disclosure Requirements
One of the most significant updates is the clarification of disclosure expectations. GASB 105 requires governments to disclose:
- The nature of the subsequent event
- An estimate of its financial effect, or a statement that such an estimate cannot be made
The disclosure threshold remains centered on whether the subsequent event is essential for users’ understanding of the financial statements. However, the updated definitions and clearer framework are expected to result in more consistent disclosure practices across governments.
What This Means in Practice
Finance teams should expect increased scrutiny over:
- Litigation developments after year-end
- Grant award notifications (including recissions) received after year-end
- Significant capital project approvals
- Major debt issuances or refundings
3. Updated Guidance on Issuance Date
GASB 105 clarifies that the “date through which management evaluated subsequent events” is the date the financial statements are made available for issuance, rather than the date they are actually issued. This better aligns with governmental processes, where governing body approvals and distribution timelines vary.
Governments must ensure documentation is sufficient to support the evaluation period and governance requirements.
4. Key Terminology Modernization
The standard updates legacy language from GASB 56 to reflect current financial reporting practices. While these changes do not alter substantive requirements, they reduce interpretive ambiguity and improve alignment with the overall GASB reporting framework.
Why GASB 105 Matters for Governments
Although GASB 105 may appear procedural, the implications for public sector finance teams are meaningful.
Greater Judgment Required
Because the standard ties more directly to the conceptual framework, governments will need to exercise increased professional judgment when determining whether conditions existed at the reporting date. This is especially relevant for:
- Litigation and claims activity
- Federal and state grants
- Natural disaster declarations
- Bond rating changes
- Major contract approvals
- Capital project decisions
More Consistency Across Reporting Units
For governments with multiple reporting entities — such as utilities, housing authorities, or component units — GASB 105 helps streamline application of subsequent event requirements across the organization. The standard should be implemented for the same year by a primary government and all its component units.
Audit Readiness and Documentation
Auditors will expect enhanced documentation supporting management’s evaluations. Governments should prepare for more detailed inquiry, especially regarding litigation, grants, and major financial commitments.
Stronger Financial Reporting Controls
The standard reinforces the need for strong closing procedures, including improved communication protocols between finance, legal, procurement, human resources, and operational departments.
How Governments Should Prepare
To be ready for the effective date, governments should take several practical steps:
1. Review and Update Policies and Procedures
Finance teams should revise closing calendars, reporting checklists, and documentation standards. This may require formal updates to accounting manuals or internal control policies.
2. Train Finance and Operational Leadership
Departments involved in grants, contracts, litigation, and procurement must understand their role in identifying potential subsequent events.
3. Strengthen Legal and Financial Collaboration
Regular communication with legal counsel becomes more important under GASB 105, especially for evaluating recognized versus non-recognized events.
4. Update Templates and Disclosures
Prepare new disclosure templates that align with GASB 105 requirements, including updated language and clarity around estimation requirements.
5. Apply Rules Consistently
For governments with decentralized operations or component units, ensure consistent application of the new requirements across the reporting entity.
Effective Date and Transition
GASB 105 is effective for reporting periods beginning after June 15, 2026. Governments may implement earlier, but early application must be disclosed.
The transition approach is prospective, meaning previously issued financial statements are not required to be restated.
How MGO Can Help
Public sector financial reporting is becoming more complex, and GASB 105 underscores the need for strong internal controls, clearer documentation, and consistent application of professional judgment.
MGO’s state and local government team — including former public sector executives, internal and external auditors, and consulting professionals — supports governments across the country with:
- Financial statement preparation and review
- Audit readiness and response
- Policy and process documentation
- Training support for finance teams
- Implementation of GASB standards
- Digital transformation to strengthen reporting controls
We help your government meet reporting requirements with clarity, accuracy, and confidence. Reach out to our team today to discuss how we can support your GASB 105 implementation and strengthen your financial reporting processes.