# ASC 852-20-25: Reorganizations — Quasi-Reorganizations — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/852/20/#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): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:bbbbea6616923f3491311ab07a499dbb0baf4a5c3de00a79c7bc8e698acc3812 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/852/20/#25-recognition) SEC content: no ##### [852-20-25-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:c31bf32174f081e6b916c741764974bcd8c57138ae051da64fef819f7f1a4db6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section addresses the conditions under which a corporation may recognize a readjustment of its retained earnings or accumulated deficit balance. ##### [852-20-25-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:e9a06aa78ea4609203608577703fdc10695390ac7c36a4852b1e0e6b44d8dc59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The general requirement is that additional paid-in capital, however created, shall not be used to relieve the income account of the current or future years of charges that would otherwise be made to the income account. As an exception to this requirement, if a reorganized entity would be relieved of charges that would be required to be made against income if the existing corporation were continued, it may be permissible to accomplish the same result without reorganization provided the facts were as fully revealed to and the action as formally approved by the shareholders as in reorganization. ##### [852-20-25-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:996a60fded940af8fda8e5ae429ee797b386157c8d9671a46b4ce1ca9c4a1568 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a corporation elects to restate its assets, capital stock, additional paid-in capital, and retained earnings or accumulated deficit through a readjustment and therefore avail itself of permission to relieve its future income account or retained earnings account of charges that would otherwise be made against it, it shall make a clear report to its shareholders of the restatements proposed to be made, and obtain their formal consent. It shall present a fair balance sheet as at the date of the readjustment, in which the adjustment of carrying amounts is reasonably complete, in order that there may be no continuation of the circumstances that justify charges to additional paid-in capital. ##### [852-20-25-4](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:a770d2b45b5e4d448dec6f1db3e13f9c6d5d98ddac6cab4ddddadaccebc477c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the amounts to be written off in a readjustment have been determined, they shall be charged first against retained earnings to the full extent of such retained earnings; any balance may then be charged against additional paid-in capital. An entity that has subsidiaries shall apply this rule in such a way that no consolidated retained earnings survive a readjustment in which any part of losses has been charged to additional paid-in capital. If the retained earnings of any subsidiaries cannot be applied against the losses before application against additional paid-in capital, the parent entity's interest in such retained earnings shall be regarded as capitalized by the readjustment just as retained earnings at the date of acquisition is capitalized, so far as the parent is concerned. ##### [852-20-25-5](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:f7dd090cdd7101abe47a4b0dbac501eadf6b008bc2a91af197ae9f309fe96e73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effective date of the readjustment, from which the income of the entity is subsequently determined, shall be as near as practicable to the date on which formal consent of the stockholders is given, and shall ordinarily not be before the close of the last completed fiscal year. When the readjustment has been completed, the entity's accounting shall be substantially similar to that appropriate for a new entity. ##### [852-20-25-6](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:7949fee7146ebf8ed20462f824509791c6dd0f7024ed2a544d9dd24680e9993f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Additional paid-in capital originating in such a readjustment is restricted in the same manner as that of a new corporation; charges against it shall be only those which may properly be made against the additional paid-in capital of a new corporation. ##### [852-20-25-7](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:36.577Z to 2026-09-10T02:03:36.577Z Record version: sha256:4e500091b7546eee27d2d542d1e64fb7caafa84bcec415ed086fa035bc82e1d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting for tax benefits arising from deductible temporary differences and carryforwards related to a readjustment is addressed in Subtopic 852-740.