Judgment Case 3 – 8 Post Fiscal Year-End Events Essay

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Northwest Distribution Corporation had three significant events between their December 31, 2011 fiscal year-end, and March 15, 2012, the date that their financial statements were issued. It is important to analyze each event and use your best judgment to determine if it is necessary to disclose this information as a subsequent event disclosure note, as required by the Financial Accounting Standards Board, ASC 855: Subsequent Events, Statement of Financial Accounting Standards No. 165, 2009. Event 1: On January 22, 2012, the company negotiated a major merger with Blandon Industries. The merger will be completed by the middle of 2012. In my opinion this is an event that should be disclosed on the financials. This doesn’t seem to be just a possibility. It seems that all of the necessary work has been done, since it will be completed by the middle of 2012. If this event was just something that they were just thinking about, then it definitely would not need to be disclosed. Even though it does not state here, it could very well be a situation that would fall under a related-party transaction. A transaction of this type could “involve owners, management, families of owners or management, affiliated companies and other parties that can influence or be influenced by the company” (Spiceland, et al., 2011, p. 126-127). “When related-party transactions occur, companies must disclose the nature of the relationship, provide a description of the transactions, and report the dollar amounts of transactions and any amounts due from or to related parties” (Spiceland, et al., 2011, p.127). If this is the case, then it is to be disclosed on the financials as required by FASB ASC 850 -10-50; Related party Disclosures – Overall - Disclosure, Statement of Financial Accounting Standards No. 57, 1982. If this is not a related-party transaction, it is not necessary to

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