{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/505/60/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"505","topic_title":"Equity","subtopic":"505-60","subtopic_title":"Spinoffs and Reverse Spinoffs","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"505-60-25-1","para":"25-1","html":"
This Section identifies the required accounting for a spinoff transaction. It also provides guidance on when a spinoff shall be treated as a reverse spinoff and the accounting required by that determination.
","snippet":"This Section identifies the required accounting for a spinoff transaction. It also provides guidance on when a spinoff shall be treated as a reverse spinoff and the accounting required by that determination.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5659b2ee09d702e213929d8fae9120b2f11d9b41417c3ead24f8abae331ad960","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1eaae44975ca4832255e583997d5bac54f218c21821d30b4e5d1fd6c9e468479","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}},{"block":null,"heading":"Required Accounting for Spinoffs, Including Reverse Spinoffs","paragraphs":[{"citation":"505-60-25-2","para":"25-2","html":"
Paragraph 845-10-30-10 requires that the accounting for the distribution of nonmonetary assets to owners of an entity in a spinoff be based on the recorded amount (after reduction, if appropriate, for an indicated impairment of value). As specified in Section 505-60-15, a further requirement of the nonmonetary assets being distributed is that they constitute a business. Accordingly, an entity's distribution of the shares of a wholly owned or consolidated subsidiary to its shareholders shall be recorded based on the carrying value of the subsidiary. Regardless of whether the spun-off operations will be sold immediately after the spinoff, the transaction shall not be accounted for as a sale of the accounting spinnee followed by a distribution of the proceeds.
","snippet":"Paragraph 845-10-30-10 requires that the accounting for the distribution of nonmonetary assets to owners of an entity in a spinoff be based on the recorded amount (after reduction, if appropriate, for an indicated impair…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1bda9ba18ccaabf8c8b1fba462acfec3473906ca45e4d83e3d99b2b0f90976d","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}},{"citation":"505-60-25-3","para":"25-3","html":"
See Example 1 (paragraph 505-60-55-1) for an illustration of a spinoff transaction.
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In a reverse spinoff, the legal spinnee shall be treated as though it were the spinnor for accounting purposes (accounting spinnor). This is referred to as reverse spinoff accounting.
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Accounting for a reverse spinoff transaction based on its legal form would present the legal spinnor as the accounting spinnor and the legal spinnee as the accounting spinnee. However, in substance, the legal spinnor has disposed of its own operations and continued the operations of the legal spinnee. The legal form of the spinoff may have been driven primarily by tax planning strategies. Accounting for the transaction based on its substance depicts the legal spinnee as the accounting spinnor and the legal spinnor as the accounting spinnee.
","snippet":"Accounting for a reverse spinoff transaction based on its legal form would present the legal spinnor as the accounting spinnor and the legal spinnee as the accounting spinnee. However, in substance, the legal spinnor has…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d98f5fa290555774020754fe3758d98bfb1dca0c07d19a8063c3fdb249414105","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}},{"citation":"505-60-25-6","para":"25-6","html":"
See Example 2 (paragraph 505-60-55-4) for an illustration of a reverse spinoff transaction.
","snippet":"See Example 2 (paragraph 505-60-55-4) for an illustration of a reverse spinoff transaction.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:79f4e08172ce5c63ab184d55a8f737e25fe1fecf93b12492e24a6978c7856c86","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}},{"citation":"505-60-25-7","para":"25-7","html":"
Reverse spinoff accounting is appropriate if treatment of the legal spinnee as the accounting spinnor results in the most accurate depiction of the substance of the transaction for shareholders and other users of the financial statements. The determination of whether reverse spinoff accounting is appropriate is a matter of judgment that depends on an evaluation of all relevant facts and circumstances. The following paragraph provides guidance on making the required determination.
","snippet":"Reverse spinoff accounting is appropriate if treatment of the legal spinnee as the accounting spinnor results in the most accurate depiction of the substance of the transaction for shareholders and other users of the fin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b8712231d0a7d9bfdc0c3284b1817cd53f7e52f0888b29944b7a8857db1b42a","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8dca864b8620d7a6e34f61233e532c41bd96e902579e08ab435631d16787821a","downloaded_from":"2026-09-10T00:39:28.173Z","last_downloaded_at":"2026-09-10T00:39:28.173Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481423","source_sha256":"58a09c0674c97207529e292ae2ac9b5d66af81ebb5295b90994eae5f55b03160"}},{"block":null,"heading":"Determining the Accounting Spinnor and Spinnee","paragraphs":[{"citation":"505-60-25-8","para":"25-8","html":"
In order to determine the required accounting and reporting in a spinoff transaction, an entity needs to determine which party is the accounting spinnor and which is the accounting spinnee. In determining whether reverse spinoff accounting is appropriate, a presumption shall exist that a spinoff be accounted for based on its legal form, in other words, that the legal spinnor is also the accounting spinnor. However, that presumption may be overcome. An evaluation of the following indicators shall be considered in that regard. Nevertheless, no one indicator shall be considered presumptive or determinative. The following are indicators that a spinoff should be accounted for as a reverse spinoff:
  1. a
    The size of the legal spinnor and the legal spinnee. All other factors being equal, in a reverse spinoff, the accounting spinnor (legal spinnee) is larger than the accounting spinnee (legal spinnor). The determination of which entity is larger is based on a comparison of the assets, revenues, and earnings of the two entities. There are no established bright lines that shall be used to determine which entity is the larger of the two.
  2. b
    The fair value of the legal spinnor and the legal spinnee. All other factors being equal, in a reverse spinoff, the fair value of the accounting spinnor (legal spinnee) is greater than that of the accounting spinnee (legal spinnor).
  3. c
    Senior management. All other factors being equal, in a reverse spinoff, the accounting spinnor (legal spinnee) retains the senior management of the formerly combined entity. Senior management generally consists of the chairman of the board, chief executive officer, chief operating officer, chief financial officer, and those divisional heads reporting directly to them, or the executive committee if one exists.
  4. d
    Length of time to be held. All other factors being equal, in a reverse spinoff, the accounting spinnor (legal spinnee) is held for a longer period than the accounting spinnee (legal spinnor). A proposed or approved plan of sale for one of the separate entities concurrent with the spinoff may identify that entity as the accounting spinnee.
See Examples 3 and 4 (paragraphs
505-60-55-7 through 55-12
) for illustrations of the determination of the accounting spinnor and spinnee.
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