# ASC 505-60: Equity — Spinoffs and Reverse Spinoffs Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/60/) 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): 2026-09-10T00:39:16.049Z to 2026-09-10T00:39:50.123Z Record version: sha256:b9e674f0a489e30c17fc3600cb65d4628a8d5940048a3b35c286bcd871313fb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60: Equity — Spinoffs and Reverse Spinoffs ### Machine-generated study aids ```json { "summary": "ASC 505-60 governs the pro rata distribution of nonmonetary assets that constitute a business to an entity's owners (a spinoff). Such distributions are recorded at the carrying (recorded) amount of the distributed business, reduced for any indicated impairment, and are never accounted for as a sale of the spinnee followed by a distribution of proceeds — even if the spun-off operations are sold immediately afterward. When the substance of the transaction differs from its legal form, the legal spinnee is treated as the accounting spinnor (reverse spinoff accounting).", "key_points": [ "The Subtopic applies only to distributions of nonmonetary assets to owners that constitute a business; distributions of nonmonetary assets that do not constitute a business are outside its scope (505-60-15-2 through 15-3).", "Per paragraph 845-10-30-10, as applied in 505-60-25-2, a spinoff of a wholly owned or consolidated subsidiary is recorded at the subsidiary's carrying value (after reduction for any indicated impairment of value), and the transaction is not accounted for as a sale of the accounting spinnee followed by a distribution of proceeds, regardless of an immediate post-spinoff sale.", "In a reverse spinoff, the legal spinnee is treated as the spinnor for accounting purposes (the accounting spinnor) because in substance the legal spinnor disposed of its own operations and continued the legal spinnee's operations (505-60-25-4 through 25-5).", "A presumption exists that a spinoff is accounted for based on its legal form (legal spinnor = accounting spinnor); that presumption may be overcome only by judgment based on all relevant facts and circumstances (505-60-25-7 through 25-8).", "The four indicators of reverse spinoff accounting — relative size (assets, revenues, earnings), relative fair value, retention of senior management, and length of time to be held (a concurrent plan of sale suggests that entity is the accounting spinnee) — are evaluated together, and no single indicator is presumptive or determinative (505-60-25-8(a) through (d)).", "The identification of the accounting spinnee matters for reporting: the accounting spinnee is reported as a discontinued operation by the accounting spinnor if it qualifies and meets the conditions in 205-20-45-1A through 45-1C (505-60-45-1).", "Compensation consequences of exchanging or modifying share options or other equity instruments in connection with an equity restructuring are addressed in Topic 718 (505-60-60-1)." ], "categories": [ "Debt and equity", "Derecognition", "Presentation", "Initial measurement" ], "audience_level": "intermediate", "student_note": "Exam traps: (1) no gain is recognized — the distributed business comes off the books at carrying value, even if the shareholders sell it the next day; and (2) the \"reverse\" label is not optional dressing — if the legal spinnee is bigger, more valuable, keeps senior management, and the legal spinnor is slated for sale, you must flip the accounting so the legal spinnor's operations are shown as disposed (often as a discontinued operation).", "related_topics": [ "845-10", "205-20", "718", "805", "810", "360-10" ], "key_concepts": [ "spinoff", "reverse spinoff", "accounting spinnor and spinnee", "nonmonetary distribution to owners", "carrying value recognition", "substance over legal form", "discontinued operations", "business definition" ] } ``` Source downloaded (UTC): 2026-09-10T00:39:16.049Z to 2026-09-10T00:39:16.049Z Record version: sha256:e00263b2abf7c9ceb3e9ad4921987a6c9f1ceb1927d7cf1539dca20993f24a82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/505/60/#00-status) SEC content: no ##### [505-60-00-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:16.049Z to 2026-09-10T00:39:16.049Z Record version: sha256:d6694da221629996ebef67c20dc4aeb9ccf1f0c7af632f51069a1baf4d9cbbc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
505-60-15-1AmendedAccounting Standards Update No. 2016-1912/14/2016
505-60-45-1AmendedAccounting Standards Update No. 2014-0804/10/2014
Source downloaded (UTC): 2026-09-10T00:39:19.800Z to 2026-09-10T00:39:19.800Z Record version: sha256:cfbbe59034d68820c302b215cf8339e358f069514781dc677557ac6db2422601 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/505/60/#05-overview-and-background) SEC content: no ##### [505-60-05-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:19.800Z to 2026-09-10T00:39:19.800Z Record version: sha256:383fc55bc1627c4d38f912b6946fa5b2d845e6a8487fe63993c8b2ae92063888 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance related to the distribution of nonmonetary assets that 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.") to owners of an entity in transactions commonly referred to as spinoffs. This Subtopic also addresses [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.") transactions in which the substance of the transaction may differ from the legal form, and provides guidance on how to determine such situations and their required accounting and reporting. ##### [505-60-05-2](https://asc.understandingaccounting.org/asc/505/60/#505-60-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:19.800Z to 2026-09-10T00:39:19.800Z Record version: sha256:1346198813ffa536b759a7ebf69344f43cec18f4b1a37ad332c767fb74fdaacb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may desire to reorganize its operations in response to its business needs. For example, an entity (the spinnor) may transfer assets into a new legal spun-off entity (the spinnee) and distribute the shares of the spinnee to its shareholders, without the surrender by the shareholders of any stock of the spinnor. Such a transaction is commonly referred to as a spinoff. An illustration of a spinoff is presented in Example 1 (see paragraph [505-60-55-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-1)). ##### [505-60-05-3](https://asc.understandingaccounting.org/asc/505/60/#505-60-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:19.800Z to 2026-09-10T00:39:19.800Z Record version: sha256:d8aa501658b5508060b406e4d70d6c6aad1eb043d556848331745a60ec984305 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A spinoff allows an entity to be reorganized in a manner that allows it to meet the needs of its owners. However, there may be other benefits as well. If the spinoff qualifies as a nontaxable reorganization, the distribution results in no taxable gain being recognized by either the spinnor or its shareholders. Additionally, if the spinnee is subsequently sold by the shareholders, the double taxation that would have occurred if an entity sold its subsidiary directly and distributed the proceeds to its shareholders is avoided. ##### [505-60-05-4](https://asc.understandingaccounting.org/asc/505/60/#505-60-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:19.800Z to 2026-09-10T00:39:19.800Z Record version: sha256:1af9be9d1e733da01adc4def7136b48e7ddcfbc05c3888c32752550c84b0ad4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In certain cases, the spinoff of a subsidiary to its shareholders is such that the legal form of the transaction does not match its substance. That is, in certain circumstances, the spinnee will be the continuing entity and the transaction will commonly be referred to 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."). An entity needs to determine whether to account for a spinoff as a reverse spinoff based on the substance instead of the legal form of the transaction. An illustration of a reverse spinoff is presented in Example 2 (see paragraph [505-60-55-4](https://asc.understandingaccounting.org/asc/505/60/#505-60-55-4)). Source downloaded (UTC): 2026-09-10T00:39:23.278Z to 2026-09-10T00:39:23.278Z Record version: sha256:e1c208332f099446d1537a5ee36edb2f34e01de8b1ae0a722c3574fd09e8ce84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/505/60/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [505-60-15-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:23.278Z to 2026-09-10T00:39:23.278Z Record version: sha256:d9b17fbf29ab7d8c4e47190dbecf0e8bca318c1a53df52568e7c694d904cbe60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities, unless more specific guidance is provided in other Topics. #### Transactions ##### [505-60-15-2](https://asc.understandingaccounting.org/asc/505/60/#505-60-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:23.278Z to 2026-09-10T00:39:23.278Z Record version: sha256:3d7bc94e2867a063d48bc66adaef13fc900a38c6950299f78ebaa9f98699d6d3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all transactions involving the distribution of nonmonetary assets that 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.") to owners of an entity. ##### [505-60-15-3](https://asc.understandingaccounting.org/asc/505/60/#505-60-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:23.278Z to 2026-09-10T00:39:23.278Z Record version: sha256:39284d628c35f80ca7c2c6c9f3e86bb23970863352cfbfeb24063f645a664755 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to distributions of nonmonetary assets that do not constitute a business. 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. Source downloaded (UTC): 2026-09-10T00:39:30.567Z to 2026-09-10T00:39:30.567Z Record version: sha256:573bcf10c376625407dc0419e2e2f21fc3337e89901140709e8fb829264273e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/505/60/#45-other-presentation-matters) SEC content: no ##### [505-60-45-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:30.567Z to 2026-09-10T00:39:30.567Z Record version: sha256:d78a61266d494377c5d0629c2b56ed0737983e4291ce064ec1286e50c63db1ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The determination of the accounting spinnor and spinnee under the requirements of paragraph [505-60-25-8](https://asc.understandingaccounting.org/asc/505/60/#505-60-25-8) may have significant implications with regard to the reporting of discontinued operations in accordance with Subtopic 205-20. That is, the accounting spinnee shall be reported as a discontinued operation by the accounting spinnor if the spinnee is a discontinued operation and meets the conditions for such reporting contained in paragraphs [205-20-45-1A through 45-1C](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-1A) . 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. Source downloaded (UTC): 2026-09-10T00:39:35.416Z to 2026-09-10T00:39:35.416Z Record version: sha256:80619ecb7a3695377e6d2aea34367cbb74b98804e15f591088866eeab51bdcea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/505/60/#60-relationships) SEC content: no #### Compensation—Stock Compensation ##### [505-60-60-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:35.416Z to 2026-09-10T00:39:35.416Z Record version: sha256:617b2bba43a66f79ceb88ed887c9abde330e659b3df89b5695d0cf94817a3ccf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For compensation-related consequences of exchanges of share options or other equity instruments or changes to their terms in conjunction with an equity restructuring, see Topic 718. Source downloaded (UTC): 2026-09-10T00:39:42.689Z to 2026-09-10T00:39:42.689Z Record version: sha256:d9f139ec199b182bf0ba7aabc47485e935ef8fc28b3fba281b4674024da2f0b5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/505/60/#sec-00-status) SEC content: yes ##### [505-60-S00-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:42.689Z to 2026-09-10T00:39:42.689Z Record version: sha256:b885df9bdc20afde9a7db94effed4bcd79ba5d47403ba7a0a3dde22a4ddb0b16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
505-60-S99-1AmendedAccounting Standards Update No. 2012-0308/27/2012
Source downloaded (UTC): 2026-09-10T00:39:46.673Z to 2026-09-10T00:39:46.673Z Record version: sha256:f3d73fc55ced3e1f672570578531814f1c08863c762b68b576794a74ed4cf7f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-S45: SEC 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/505/60/#sec-45-other-presentation-matters) SEC content: yes #### Accounting for the Spinoff of a Subsidiary ##### [505-60-S45-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-S45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:46.673Z to 2026-09-10T00:39:46.673Z Record version: sha256:a3bad03935937a833b38bdee2ef026d9b8fb33303965c3e8f1db2f443adbacbd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-60-S99-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-S99-1), SAB Topic 5.Z.7, for SEC Staff views on whether a spinoff transaction can be reflected as a change in the reporting entity. Source downloaded (UTC): 2026-09-10T00:39:50.123Z to 2026-09-10T00:39:50.123Z Record version: sha256:de0ec0b79dec54a7866fef3e13c9edd348597fcc0097b4ebce3dd87d2b57599b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-60-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/505/60/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [505-60-S99-1](https://asc.understandingaccounting.org/asc/505/60/#505-60-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:50.123Z to 2026-09-10T00:39:50.123Z Record version: sha256:277f995cb820c191a85a822ed0456796fb3768e4f1400e0bdf4b787dc5075933 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.Z.7, Accounting for the Spin-off of a Subsidiary. - Facts: A Company disposes of a business through the distribution of a subsidiary's stock to the Company's shareholders on a pro rata basis in a transaction that is referred to as a spin-off. - Question: May the Company elect to characterize the spin-off transaction as resulting in a change in the reporting entity and restate its historical financial statements as if the Company never had an investment in the subsidiary, in the manner specified by FASB ASC Topic 250, Accounting Changes and Error Corrections? - Interpretive Response: Not ordinarily. If the Company was required to file periodic reports under the Exchange Act within one year prior to the spin-off, the staff believes the Company should reflect the disposition in conformity with FASB ASC Topic 360. This presentation most fairly and completely depicts for investors the effects of the previous and current organization of the Company. However, in limited circumstances involving the initial registration of a company under the Exchange Act or Securities Act, the staff has not objected to financial statements that retroactively reflect the reorganization of the business as a change in the reporting entity if the spin-off transaction occurs prior to effectiveness of the registration statement. This presentation may be acceptable in an initial registration if the Company and the subsidiary are in dissimilar businesses, have been managed and financed historically as if they were autonomous, have no more than incidental common facilities and costs, will be operated and financed autonomously after the spin-off, and will not have material financial commitments, guarantees, or contingent liabilities to each other after the spin-off. This exception to the prohibition against retroactive omission of the subsidiary is intended for companies that have not distributed widely financial statements that include the spun-off subsidiary. Also, dissimilarity contemplates substantially greater differences in the nature of the businesses than those that would ordinarily distinguish reportable segments as defined by FASB ASC paragraph [280-10-50-10](https://asc.understandingaccounting.org/asc/280/10/#280-10-50-10) (Segment Reporting Topic).