# ASC 505-60-25: Equity — Spinoffs and Reverse Spinoffs — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/60/#25-recognition) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:9b9afd3a1d86961f89908bd494298bb522d982b850f949368e73b061ed4bb625 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/505/60/#25-recognition) SEC content: no ##### [505-60-25-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:5659b2ee09d702e213929d8fae9120b2f11d9b41417c3ead24f8abae331ad960 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section identifies the required accounting for a [spinoff](https://asc.understandingaccounting.org/glossary/s/#spinoff "The transfer of assets that constitute a business by an entity (the spinnor) into a new legal spun-off entity (the spinnee), followed by a distribution of the shares of the spinnee to its shareholders, without the surrender by the shareholders of any stock of the spinnor.") transaction. It also provides guidance on when a spinoff shall be treated as a [reverse spinoff](https://asc.understandingaccounting.org/glossary/r/#reverse-spinoff "A spinoff of a subsidiary to an entity's shareholders in which the legal form of the transaction does not match its substance such that the new legal spun-off entity (the spinnee) will be the continuing entity.") and the accounting required by that determination. #### Required Accounting for Spinoffs, Including Reverse Spinoffs ##### [505-60-25-2](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:b1bda9ba18ccaabf8c8b1fba462acfec3473906ca45e4d83e3d99b2b0f90976d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [845-10-30-10](https://asc.understandingaccounting.org/asc/845/10/#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](https://asc.understandingaccounting.org/glossary/b/#business "Paragraphs 805-10-55-3A805-10-55-4805-10-55-5805-10-55-6 and 805-10-55-8805-10-55-9 define what is considered 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. ##### [505-60-25-3](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:ec3711664f542d7a1c64ad4facedd8926d5a9ce4a7a9405f481e44fe31debc73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1 (paragraph [505-60-55-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-1)) for an illustration of a spinoff transaction. ##### [505-60-25-4](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:521b9f6c733e142f77afe3c237ce8e3dc2f9b920e6b25460dabd90a04d1869e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-60-25-5](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:d98f5fa290555774020754fe3758d98bfb1dca0c07d19a8063c3fdb249414105 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-60-25-6](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:79f4e08172ce5c63ab184d55a8f737e25fe1fecf93b12492e24a6978c7856c86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 2 (paragraph [505-60-55-4](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-4)) for an illustration of a reverse spinoff transaction. ##### [505-60-25-7](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:3b8712231d0a7d9bfdc0c3284b1817cd53f7e52f0888b29944b7a8857db1b42a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. #### Determining the Accounting Spinnor and Spinnee ##### [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:28.173Z to 2026-09-10T00:39:28.173Z Record version: sha256:80407ca229ef601e80c90028850bda6fd53f7e2a460973f6cac206b808b50c55 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-7) ) for illustrations of the determination of the accounting spinnor and spinnee.