# ASC 505-60-55: Equity — Spinoffs and Reverse Spinoffs — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/60/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:194616d4cba45b830e917e533799068b717efad6917014efdf0762edee919c43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/505/60/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [505-60-55-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:579c3fba49bef4e7c430b76babff77a53881e24deabebf32de2bbfeda026ccf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example presents an illustration of 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."). ##### [505-60-55-2](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:52cf4ef5b3854029e701c9617e956561c233864437db62d17c3470ca61745f4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Big Company owns and operates a mall and a retail store that occupies the anchor store position in that mall. The mall and the store are managed by two separate divisions. The shareholders of Big Company would like to split Big Company into two entities so that each can focus on its own operations. To achieve this, Big Company transfers the mall's assets and operations into a newly created subsidiary, Mall Company, and distributes the shares of Mall Company to its shareholders on a pro rata basis in a spinoff. ##### [505-60-55-3](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:57b77dea75893ca7495648ccf1db904032f6b7af4defb5cbefd8b002bd1d4ca5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [505-60-25-2](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-2) provides guidance on the accounting for a spinoff. ##### [505-60-55-4](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:e90ba16d58184f70b409ce9df82c28f4380d618ff929faeef549fed379b21c6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example presents an illustration of 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."). ##### [505-60-55-5](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:faa33c01898f92e4826120e03a1e4be1c9a5dd7910e2572547937821fe4a9316 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Snack Food Company owns two subsidiaries—Ice Cream Subsidiary and Snack Subsidiary. Ice Cream Subsidiary is significantly larger and more profitable than Snack Subsidiary. The shareholders of Snack Food Company would like to continue the ice cream operations and dispose of the snack food operations. To facilitate this, Snack Food Company distributes the shares of Ice Cream Subsidiary to the shareholders thereby creating Ice Cream Company. The shareholders are then able to dispose of the operations of Snack Food Company (now solely comprising Snack Subsidiary operations) by selling the shares directly to a third party and, at the same time, retain ownership of the Ice Cream Company. ##### [505-60-55-6](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:63395f323d0f69865c33f49b13a2d40f4c86501dc2aaeb5a94ba70102c3c70d4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [505-60-25-4 through 25-7](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-4) provide guidance on the accounting for a reverse spinoff. ##### [505-60-55-7](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:e73785dcdae31ad048448623024d23a419c9d5a1b40fc6613e7dcc80766ed249 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example demonstrates the application of the requirements in paragraph [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8) to identify the accounting spinnor and spinnee, which may differ from the legal spinnor and spinnee. This Example has the following assumptions: 1. a Retail Company, a retail store chain, has a wholly owned restaurant subsidiary. The retail and restaurant operations are operated independently with a small executive management team overseeing both. Because the two have unrelated operations, the shareholders believe that the two operations should be separated by way of a spinoff. They believe that this will allow those separate entities to pursue opportunities in their respective industries and maximize their individual value. 2. b In order to accomplish the spinoff, Retail Company creates a new legal entity, Restaurant Company, into which the assets and operations of the restaurant subsidiary are transferred. The shares of Restaurant Company are then distributed to the shareholders of Retail Company on a pro rata basis. 3. c The executive management team of Retail Company will be divided between the two entities. A comparison of the two entities is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-D33BABC8-44AE-4379-83D2-3839497EDAA5-low.gif) (In 000s) Assets Revenues Net Income Fair Value Retail $500 $410 $150 $675 Restaurant $100 $75 $21 $170 ##### [505-60-55-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:9108962afcaa3161fb7128d9c105c45e7659f8f2915e3dea0fd29310dcf65dc5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an analysis of the indicators contained in paragraph [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8), the spinoff should be accounted for in accordance with its legal form. That is, the transaction should not be accounted for as a reverse spinoff. Retail Company should be designated as the accounting spinnor based on the first two of the following indicators: 1. a Retail Company has substantially larger operations than Restaurant Company. 2. b The fair value of Retail Company is greater than Restaurant Company. 3. c The management team is allocated between the two operations. 4. d There are no planned or likely disposals of either Retail Company or Restaurant Company. ##### [505-60-55-9](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:8825711e9141f248c2d2070d8b5c5c50db00b5dd07d90c052bd4ee1d19c66185 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The designation of Retail Company as the accounting spinnor will provide the most accurate depiction of the transaction to shareholders and other users of the financial statements because, in substance, Retail Company has spun off its Restaurant Company into a separate entity. ##### [505-60-55-10](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:e6a1d78a5d00b252c67152fbb1cdb955143c05d708457f2d13ed125a2d2df52a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example demonstrates the application of the requirements in paragraph [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8) to identify the accounting spinnor and spinnee, which may differ from the legal spinnor and spinnee. This Example has the following assumptions: 1. a Retail Company, a retail store chain, has a wholly owned restaurant subsidiary. The retail and restaurant operations are operated independently, with a small executive management team overseeing both. While the restaurant subsidiary has grown rapidly, the retail operations have deteriorated steadily due to increased competition. The shareholders believe that the two operations should be separated by way of a spinoff. Management intends to dispose of the retail operations. 2. b In order to accomplish the spinoff, Retail Company creates a new legal entity, Restaurant Company, into which the assets and operations of the restaurant subsidiary are transferred. The shares of Restaurant Company are then distributed to the shareholders of Retail Company on a pro rata basis. 3. c The executive management team of the combined entity will be assigned primarily to Restaurant Company, as the intent is to dispose of Retail Company (now solely comprising the retail operations). A comparison of certain statistics of the two entities is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-972753C7-3BE8-473A-8B7D-B1DA5EC25157-low.gif) (In 000s) Assets Revenues Net Income Fair Value Retail $300 $210 $35 $375 Restaurant $600 $450 $150 $700 ##### [505-60-55-11](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:ea88e252089247f990155f7ecb42b53f6159374608b636bf1129e1d70e8d9ba5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an analysis of the indicators contained in paragraph [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8), the spinoff should be accounted for as a reverse spinoff. Restaurant Company, although the legal spinnee, should be designated as the accounting spinnor based on the following: 1. a Restaurant Company has substantially larger operations than Retail Company. 2. b The fair value of Restaurant Company is greater than that of Retail Company. 3. c The management team is primarily assigned to Restaurant Company. 4. d Management intends to dispose of Retail Company upon finalizing the spinoff. ##### [505-60-55-12](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:33.301Z to 2026-09-10T00:39:33.301Z Record version: sha256:e8817c875fbc10d4cff8d9aa3d42ad57a7d6c86547c0f6b0a0d7542c1040e203 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The designation of Restaurant Company as the accounting spinnor will provide the most accurate depiction of the transaction to shareholders and other users of the financial statements, as, in substance, Retail Company has disposed of its retail operations and continued its restaurant operations.