# ASC Topic 852: Reorganizations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/852/) 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): 2026-09-10T02:02:52.609Z to 2026-09-10T02:03:59.595Z Record version: sha256:b77a62a1e3cf62eac768be0b73b0943dd45eac3e78cff889b2bb9fc68a070974 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 852 covers financial reporting by entities undergoing corporate reorganization, in two flavors. Subtopic 852-10 addresses Chapter 11 debtors expecting to reorganize as going concerns: GAAP continues to apply, but the statements must isolate reorganization effects—prepetition liabilities subject to compromise are segregated at expected allowed amounts (852-10-45-4 through 45-5), reorganization items (including professional fees expensed as incurred and interest income earned only because of the proceeding) are shown separately in the income statement and cash flow statement (852-10-45-9 through 45-13), and interest expense is reported only to the extent it will be paid or is probable to be an allowed claim, with the contractual shortfall disclosed (852-10-45-11, 50-3). On emergence, fresh-start reporting is required only if reorganization value is less than postpetition liabilities plus allowed claims and pre-confirmation voting shareholders receive less than 50% of the emerging entity's voting shares (852-10-45-19), after which value is allocated using Subtopic 805-20 with residual goodwill, retained earnings resets to zero, and straddling comparative statements are prohibited (852-10-45-20, 45-21, 45-26). Subtopic 852-20 governs the out-of-court quasi-reorganization ("readjustment")—the express exception to the rule that additional paid-in capital may not relieve the income account (852-20-25-2)—requiring full disclosure to and formal shareholder consent, fair (not unduly conservative) asset carrying amounts, write-offs charged first to retained earnings then to APIC, and a new retained earnings account dated from the readjustment's effective date (852-20-25-3 through 25-5, 30-2, 50-2). Source downloaded (UTC): 2026-09-10T02:02:52.609Z to 2026-09-10T02:03:24.197Z Record version: sha256:1458adcd4207ce1d2731e49dd40ebfe670cc946fc9a23fcafe37d08d227ee4ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10: Reorganizations — Overall ### Machine-generated study aids ```json { "summary": "ASC 852-10 governs financial reporting by entities that have filed a Chapter 11 petition and expect to reorganize as going concerns, plus their reporting upon emergence under a confirmed plan. During the case, GAAP continues to apply but the statements must separate reorganization-related transactions from ongoing operations: prepetition liabilities subject to compromise are segregated on the balance sheet at expected allowed amounts, and reorganization items are shown separately in the income statement and cash flow statement. On emergence, an entity adopts fresh-start reporting only if reorganization value is less than postpetition liabilities plus allowed claims and pre-confirmation voting shareholders receive less than 50% of the emerging entity's voting shares.", "key_points": [ "Entering Chapter 11 does not change the GAAP an entity applies, but financial statements for periods including and after the filing must distinguish transactions and events directly associated with the reorganization from ongoing operations (852-10-45-1 through 45-2).", "The balance sheet must separate prepetition liabilities subject to compromise from those not subject to compromise and from postpetition liabilities; liabilities that may be affected by the plan are reported at expected allowed amounts under Subtopic 450-20, and doubtful secured claims stay in the subject-to-compromise category (852-10-45-4 through 45-5).", "Revenues, expenses (including professional fees), realized gains and losses, and loss provisions resulting from the reorganization are reported separately as reorganization items; professional fees are expensed as incurred, not deferred or accrued at filing (852-10-45-9 through 45-10).", "Interest expense is reported only to the extent it will be paid or is probable to be an allowed priority, secured, or unsecured claim and is not a reorganization item, while interest income earned only because of the proceeding is a reorganization item; the difference between reported and contractual interest must be disclosed (852-10-45-11, 45-12, 852-10-50-3).", "Reorganization items are presented separately within operating, investing, and financing categories of the statement of cash flows (direct method preferred); if the indirect method is used, related operating receipts and payments go in a supplementary schedule or the notes (852-10-45-13, 852-10-50-6A).", "Fresh-start reporting is required upon emergence only if reorganization value of the assets immediately before confirmation is less than total postpetition liabilities and allowed claims and pre-confirmation voting shareholders receive less than 50% of the emerging entity's voting shares, with the loss of control substantive and not temporary (852-10-45-19).", "Under fresh-start reporting the reorganization value is assigned to assets and liabilities using Subtopic 805-20 procedures with any residual reported as goodwill, the new entity starts with no retained earnings or deficit, debt forgiveness is reported as extinguishment under Subtopic 220-20, and comparative statements straddling the confirmation date are prohibited (852-10-45-20, 45-21, 45-26)." ], "categories": [ "Financial statement presentation", "Disclosure", "Debt and equity", "Cash flows" ], "audience_level": "advanced", "student_note": "Exam questions almost always hinge on the two-part fresh-start test in 852-10-45-19 (reorganization value < postpetition liabilities plus allowed claims AND old shareholders get <50% of new voting shares) — both must be met, and failing them means the emerging entity merely restates compromised liabilities at present value instead of resetting its balance sheet. A common misunderstanding is treating interest expense as a reorganization item; it is not, and interest is only recorded to the extent it will be paid or is probably an allowed claim.", "related_topics": [ "852-20", "852-740", "805-20", "450-20", "220-20", "205-30" ], "key_concepts": [ "liabilities subject to compromise", "reorganization items", "fresh-start reporting", "reorganization value", "allowed claims", "plan of reorganization confirmation", "debtor-in-possession", "forgiveness of debt" ] } ``` Source downloaded (UTC): 2026-09-10T02:02:52.609Z to 2026-09-10T02:02:52.609Z Record version: sha256:d15f6ca0be54c03e50c563e1ccd8bee5df54c8431556427d8f694393cf869b28 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/852/10/#00-status) SEC content: no ##### [852-10-00-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:52.609Z to 2026-09-10T02:02:52.609Z Record version: sha256:ab0f621c5160fdf4b32516b9dbd14f3ec2a1c21af600441b4c2f3aa69c80ecf2 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
Plan (1st def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
Plan of Reorganization (formerly Plan (1st def.))AddedAccounting Standards Update No. 2014-0603/14/2014
Reorganization ValueAmendedAccounting Standards Update No. 2012-0410/01/2012
852-10-05-3AmendedAccounting Standards Update No. 2014-0603/14/2014
852-10-45-4AmendedAccounting Standards Update No. 2014-0603/14/2014
852-10-45-9AmendedAccounting Standards Update No. 2015-0101/09/2015
852-10-45-13AmendedAccounting Standards Update No. 2020-1010/29/2020
852-10-45-21AmendedMaintenance Update 2017-19 (PDF)11/15/2017
852-10-45-29AmendedMaintenance Update 2017-19 (PDF)11/15/2017
852-10-50-6AAddedAccounting Standards Update No. 2020-1010/29/2020
852-10-55-3AmendedAccounting Standards Update No. 2025-1212/17/2025
852-10-55-9 through 55-11
AmendedAccounting Standards Update No. 2025-1212/17/2025
852-10-55-9AmendedMaintenance Update 2020-18 (PDF)11/25/2020
852-10-55-10AmendedMaintenance Update 2020-18 (PDF)11/25/2020
852-10-55-10AmendedAccounting Standards Update No. 2012-0410/01/2012
852-10-55-11AmendedMaintenance Update 2016-11 (PDF)06/27/2016
852-10-55-11AmendedAccounting Standards Update No. 2012-0410/01/2012
852-10-60-1AmendedAccounting Standards Update No. 2013-0704/22/2013
Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:cb16dfa6a7b149616227466c377214d8ef3fd5fe40e67791cdf3594755ee9f8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/852/10/#05-overview-and-background) SEC content: no ##### [852-10-05-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:4e8ef81f172250f86386391e3e0d216c534f73b32a8972a8789529af64be48c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reorganizations Topic includes the following Subtopics: 1. a Overall 2. b Quasi-Reorganizations 3. c Income Taxes. ##### [852-10-05-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:6ae6a6a289395352208a051129d353c925a4ac98f0f691ff15d50c8f7a8b731a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting and financial statement disclosure for entities that have filed petitions with the [Bankruptcy Court](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-court "The United States Bankruptcy Court is an adjunct of the United States District Courts. Under the jurisdiction of the District Court, the Bankruptcy Court is generally responsible for cases filed under Chapters 7, 11, 12, and 13 of the Bankruptcy Code.") and expect to reorganize as going concerns under Chapter 11 of the [Bankruptcy Code](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-code "A federal statute, enacted October 1, 1979, as title 11 of the United States Code by the Bankruptcy Reform Act of 1978, that applies to all cases filed on or after its enactment and that provides the basis for the current federal bankruptcy system."). This Subtopic necessarily contains many references to provisions of the Bankruptcy Code; however, the material in this Subtopic should not be relied upon as definitive interpretations of the law for any purposes. The accounting and reporting guidance in this Subtopic is incremental to guidance that otherwise applies to an entity. ##### [852-10-05-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:7170f19d8f79ea66ad28e51782ee338a8210c74c83488a806c070c9c7051bfec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters reorganization under [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11.") by filing a [petition](https://asc.understandingaccounting.org/glossary/p/#petition "A document filed in a court of bankruptcy, initiating proceedings under the Bankruptcy Code.") with the Bankruptcy Court, an adjunct of the United States District Courts. The filing of the petition starts the [reorganization proceeding](https://asc.understandingaccounting.org/glossary/r/#reorganization-proceeding "A Chapter 11 case from the time at which the petition is filed until the plan is confirmed."). The goal of the proceeding is to maximize recovery by creditors and shareholders by preserving it as a viable entity with a going concern value. For that purpose, the entity prepares a [plan of reorganization](https://asc.understandingaccounting.org/glossary/p/#plan-of-reorganization "An agreement formulated in Chapter 11 proceedings under the supervision of the Bankruptcy Court that enables the debtor to continue in business. The plan, once confirmed, may affect the rights of undersecured creditors, secured creditors, and stockholders as well as those of unsecured creditors. Before a plan is confirmed by the Bankruptcy Court, it must comply with general provisions of the Bankruptcy Code. Those provisions mandate, for example, that the plan is feasible, the plan is in the best interest of the creditors, and, if an impaired class does not accept the plan, the plan must be determined to be fair and equitable before it can be confirmed.") intended to be confirmed by the court. The plan provides for treatment of all the assets and liabilities of the debtor, which might result in forgiveness of indebtedness. For the plan to be confirmed and the reorganization proceedings thereby concluded, the consideration to be received by parties in interest under the plan must exceed the consideration they would otherwise receive on liquidation of the entity under Chapter 7 of the Bankruptcy Code. The court may confirm a plan even if some classes of creditors or some of the stockholders have not accepted it, provided that it meets standards of fairness required by Chapter 11 to the dissenting class of creditors or the dissenting stockholders. ##### [852-10-05-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:0dd13eb30188c0ebbeb78c26573e823d17dec9f26939272cc71b20fef73d3e5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The plan is the heart of every Chapter 11 reorganization. The provisions of the plan specify the treatment of all creditors and equity holders upon its approval by the Bankruptcy Court. Moreover, the plan shapes the financial structure of the entity that emerges. ##### [852-10-05-5](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:27acdd67a0c9db7fbf5d88ae065d824ee98c6d0b80540c4c04e33af2dd3220e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Chapter 11 provides that, unless a [trustee](https://asc.understandingaccounting.org/glossary/t/#trustee "A person appointed by the Bankruptcy Court in certain situations based on the facts of the case, not related to the size of the entity or the amount of unsecured debt outstanding, at the request of a party in interest after a notice and hearing.") is appointed, the debtor has the exclusive right to file a plan for the first 120 days of the case, or such longer or shorter time as the Bankruptcy Court decrees, for cause. If a plan is filed within the exclusive period, additional time is provided to allow the debtor to obtain plan acceptance. The appointment of the trustee immediately terminates the debtor's exclusive right to file a plan, and any party in interest may then do so. ##### [852-10-05-6](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:87611302f00a10589dc017138318e26a8722adf6344a59c9465323bf01decaf5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Except to the extent that specific debts are determined by the Bankruptcy Court not to be discharged by the plan, the provisions of a [confirmed plan](https://asc.understandingaccounting.org/glossary/c/#confirmed-plan "An official approval by the court of a plan of reorganization under a Chapter 11 proceeding that makes the plan binding on the debtors and creditors. Before a plan is confirmed, it must satisfy 11 requirements in section 1129(a) of the Bankruptcy Code.") bind the debtor, any entity issuing securities under the plan, any entity acquiring assets under the plan, and any creditor, equity security holder, or general partner in the debtor, regardless of whether the [claim](https://asc.understandingaccounting.org/glossary/c/#claim "As defined by Section 101(4) of the Bankruptcy Code, a right to payment, regardless of whether the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, secured, or unsecured, or a right to an equitable remedy for breach of performance if such breach results in a right to payment, regardless of whether the right is reduced to a fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured right.") is impaired under the plan and whether such creditor, equity security holder, or general partner has accepted the plan. A claim is impaired if, subject to certain rights to cure defaults, its legal rights are affected adversely by the plan. ##### [852-10-05-7](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:7aa53606e06167e2411d830a5dce7a96b2c560f830c129328ce0416217f806cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In general, except as provided in the plan or in the order confirming the plan, confirmation of the plan discharges the debtor from all preconfirmation claims and terminates all rights and interest of equity security holders or general partners as provided for in the plan. ##### [852-10-05-8](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:580b08c5691890b50bcbc4ee51c55c1b25bd8d9646c40ae7d4873503374381cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Bankruptcy Court confirms a plan if it finds all of the following: 1. a The plan and the plan proponent have complied with various technical requirements of the Bankruptcy Code. 2. b Disclosures made in soliciting acceptance of the plan have been adequate. 3. c Dissenting members of [consenting classes](https://asc.understandingaccounting.org/glossary/c/#consenting-classes "Classes of creditors or stockholders that approve the proposed plan.") of [impaired claims](https://asc.understandingaccounting.org/glossary/i/#impaired-claims "In determining which class of creditors' claims or stockholders' interests must approve the plan, it is first necessary to determine if the class is impaired. A class of creditors' claims or stockholders' interests under a plan is not impaired if the plan leaves unaltered the legal, equitable, and contractual right of a class, cures defaults that lead to acceleration of debt or equity interest, or pays in cash the full amount of the claim, or for equity interests, the greater of the fixed liquidation preference or redemption price.") would receive under the plan at least the amount they would have received under a [Chapter 7](https://asc.understandingaccounting.org/glossary/c/#chapter-7 "A liquidation, voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for liquidation of the business or the debtor's estate.") proceeding. 4. d Claims entitled to priority under the Bankruptcy Code will be paid in cash. 5. e Confirmation of the plan is not likely to be followed by liquidation or further reorganization. 6. f At least one class of impaired claims, apart from insiders, has accepted the plan. 7. g The plan proponent has obtained the consent of all impaired classes of claims or equity securities, or the plan proponent can comply with the [cram-down provisions](https://asc.understandingaccounting.org/glossary/c/#cram-down-provisions "Provisions requiring that for a plan to be confirmed, a class of claims or interests must either accept the plan or not be impaired. However, the Bankruptcy Code allows the Bankruptcy Court under certain conditions to confirm a plan even though an impaired class has not accepted the plan. To do so, the plan must not discriminate unfairly and must be fair and equitable to each class of claims or interests impaired under the plan that have not accepted it. The Bankruptcy Code states examples of conditions for secured claims, unsecured claims, and stockholder interests in the fair and equitable requirement.") of the Bankruptcy Code. Under the cram-down provisions, the court may confirm a plan even if one or more classes of holders of impaired claims or equity securities do not accept it, as long as the court finds the plan does not discriminate unfairly and is fair and equitable to each [nonconsenting class](https://asc.understandingaccounting.org/glossary/n/#nonconsenting-class "A class of creditors or stockholders that does not approve the proposed plan.") impaired by the plan. ##### [852-10-05-9](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:b567ef55a2c2fd9f9ecf6c318fdfed332a25984d53eef56a9b851e8703164fb9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In general, a [secured claim](https://asc.understandingaccounting.org/glossary/s/#secured-claim "A liability that is secured by collateral. A fully secured claim is one in which the value of the collateral is greater than the amount of the claim.") is deemed to be treated fairly and equitably if it remains adequately collateralized and will receive a stream of payments whose discounted value equals the amount of the secured claim on the effective date of the plan. In general, an [unsecured claim](https://asc.understandingaccounting.org/glossary/u/#unsecured-claim "A liability that is not secured by collateral. In the case of an undersecured creditor, the excess of the secured claim over the value of the collateral is an unsecured claim, unless the debtor elects in a Chapter 11 proceeding to have the entire claim considered secured. The term is generally used in bankruptcy to refer to unsecured claims that do not receive priority under the Bankruptcy Code. Sometimes referred to as an unsecured claim liability.") is deemed to be treated fairly and equitably if it receives assets whose discounted value equals the allowed amount of the claim, or if the holder of any claim or equity security interest that is junior to the dissenting class will not receive or retain any assets under the plan. Similarly, an equity security interest is deemed fairly and equitably treated if that interest receives assets whose discounted value equals the greatest of any fixed liquidation preference, any fixed redemption price, or the value of such interest, or if no junior equity security interest will receive any assets under the plan. #### Reorganization Value ##### [852-10-05-10](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:65f44fa7335826fb7cd0c286dac875dd5980044daafa8e2388f90dae73c05a61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An important part of the process of developing a plan is the determination of the [reorganization value](https://asc.understandingaccounting.org/glossary/r/#reorganization-value "The value attributed to the reconstituted entity, as well as the expected net realizable value of those assets that will be disposed of before reconstitution occurs. Therefore, this value is viewed as the value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring.") of the entity that emerges from bankruptcy. Reorganization value generally approximates fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. The reorganization value of an entity is the amount of resources available and to become available for the satisfaction of [postpetition liabilities](https://asc.understandingaccounting.org/glossary/p/#postpetition-liabilities "Liabilities incurred after the filing of a petition that are not associated with prebankruptcy events. Thus, these liabilities are not considered prepetition liabilities.") and [allowed claims](https://asc.understandingaccounting.org/glossary/a/#allowed-claim "The amount allowed by the Bankruptcy Court as a claim against the estate. This amount may differ from the actual settlement amount.") and interest, as negotiated or litigated between the [debtor-in-possession](https://asc.understandingaccounting.org/glossary/d/#debtor-in-possession "Existing management continuing to operate an entity that has filed a petition under Chapter 11. The debtor-in-possession is allowed to operate the business in all Chapter 11 cases unless the court, for cause, authorizes the appointment of a trustee.") or trustee, the creditors, and the holders of equity interests. Reorganization value includes the sum of the value attributed to the reconstituted entity and other assets of the debtor that will not be included in the reconstituted entity. Reorganization value and the terms of the plan are determined only after extensive arm's-length negotiations or litigation between the interested parties. Before the negotiations, the debtor-in-possession, creditors, and equity holders develop their own ideas on the reorganization value of the entity that will emerge from Chapter 11. Several methods are used to determine the reorganization value; however, generally it is determined by discounting future cash flows for the reconstituted business that will emerge from Chapter 11 and from expected proceeds or collections from assets not required in the reconstituted business, at rates reflecting the business and financial risks involved. #### The Disclosure Statement ##### [852-10-05-11](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:e38a9fe9f54eafedd041fee536d90b35ffafa0e1e7866a9576c96fd1bee681e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [disclosure statement](https://asc.understandingaccounting.org/glossary/d/#disclosure-statement "A written statement containing information approved as adequate by the court. It is required to be presented by a party before soliciting the acceptance or rejection of a plan of reorganization from creditors and stockholders affected by the plan. Adequate information means information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan.") approved by the court is transmitted to all parties entitled to vote on the plan at or before the time their acceptance of the plan is solicited. The disclosure statement provides information that enables them to make informed judgments about the plan. ##### [852-10-05-12](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:7adf9c1968e22fae5b158b401a0ba09b219d662190eb602c3dc627b9f9f7a275 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No postpetition solicitation of acceptance of a plan may be made unless by the time of the solicitation a disclosure statement previously approved by the Bankruptcy Court has been sent to those whose acceptance is required. The disclosure statement must contain adequate information, which is defined in the Bankruptcy Code as information that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan, as far as it is reasonably practicable to provide in light of the nature and history of the [emerging entity](https://asc.understandingaccounting.org/glossary/e/#emerging-entity "An entity (sometimes referred to as the reorganized entity), that has had its plan confirmed and begins to operate as a new entity.") and the condition of the emerging entity's records. Examples of the kinds of items that may be included in disclosure statements to provide such information include a summary of the reorganization plan, historical and prospective financial information, and a pro forma balance sheet reporting the reorganization value and the capital structure of the emerging entity. ##### [852-10-05-13](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:25dc19de40d974ee946ecdb07ffd1613382162cdea69793295c1fc8cccfff8ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. What constitutes adequate information depends on the circumstances of the entity in Chapter 11, the nature of the plan, and the sophistication of the various classes whose acceptance is required. Although a valuation is not required for a Bankruptcy Court's approval of a disclosure statement, the instances in which valuations are not made are generally restricted to those in which the reorganization value of the emerging entity is greater than the liabilities or in which holders of existing voting shares retain more than 50 percent of the emerging entity's voting shares when the entity emerges from reorganization. ##### [852-10-05-14](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:00926ed759bd46e5cc602d5bf38a8bfa232315c300c788ac6d42264176ca5422 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After reorganization proceedings have started, acceptances of a plan may not be solicited by any person without a disclosure statement approved by the court, but acceptances obtained before the proceedings started may be counted if they were solicited in compliance with applicable nonbankruptcy law governing the adequacy of disclosure or there is not any applicable nonbankruptcy law but there was in fact adequate information provided at the time of the prebankruptcy solicitation of acceptances of the plan. ##### [852-10-05-15](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:c4631e6537726739da799b2392e612cc3ab9287fa1e377a888b07c958de39429 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. While the court determines the adequacy of the disclosure statement, entities that expect to adopt fresh-start reporting (see Section 852-10-45 for guidance on what is referred to as fresh-start reporting) should report information about the reorganization value in the disclosure statement, so that creditors and stockholders can make an informed judgment about the plan. The most likely place to report the reorganization value is in the pro forma balance sheet that is commonly part of the disclosure statement. Because reorganization value may not have been allocated to individual assets concurrently with the preparation of the pro forma balance sheet included in the disclosure statement in some cases, it may be necessary to include in the pro forma balance sheet a separate line item to reflect the difference of the total reorganization value of the emerging entity over recorded amounts. When possible, reorganization value should be segregated into major categories. #### The Financial Reporting Consequences of the Absolute Priority Doctrine ##### [852-10-05-16](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:160dffa31530152c4a89e1668055190a771a89d5f8bb65beea37d41e49603e63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the [absolute priority doctrine](https://asc.understandingaccounting.org/glossary/a/#absolute-priority-doctrine "A doctrine that provides that if an impaired class does not vote in favor of a plan, the court may nevertheless confirm the plan under the cram-down provisions of the Bankruptcy Code. The absolute priority doctrine is triggered when the cram-down provisions apply. The doctrine states that all members of the senior class of creditors and equity interests must be satisfied in full before the members of the second senior class of creditors can receive anything, and the full satisfaction of that class must occur before the third senior class of creditors may be satisfied, and so on.") of the Bankruptcy Code, if the amount of postpetition liabilities and allowed claims exceeds the reorganization value of the emerging entity, existing shareholders lose their legal right to any economic interest without the consent of creditors. Therefore, any equity interest in the emerging entity ultimately held by existing shareholders is given to them by the creditors. Among the reasons the creditors might give such shareholders equity interests in the emerging entity are to avoid the expensive and time-consuming legal proceedings necessary to implement the cram-down provisions of the Bankruptcy Code or to preserve continuity of management. Consequently, in this situation, if all of the conditions stated in paragraph [852-10-45-19](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-19) are met, then upon an entity's emergence from Chapter 11, this Subtopic requires the entity to adopt fresh-start reporting. #### Terms ##### [852-10-05-17](https://asc.understandingaccounting.org/asc/852/10/#852-10-05-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:55.129Z to 2026-09-10T02:02:55.129Z Record version: sha256:412bc5ddefed68bcf1c01ab388c8d9bf3997afd08b52b4f965926808f5bf37bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following terms are widely used when addressing reorganizations, yet are not included in the text of the standards: 1. a [Administrative expenses](https://asc.understandingaccounting.org/glossary/a/#administrative-expenses "Claims that receive priority over all other unsecured claims in a bankruptcy case. Administrative expenses (sometimes referred to as administrative claims) include the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case. Fees paid to professionals for services rendered after the petition is filed are considered administrative expenses.") 2. b [Obligations subject to compromise](https://asc.understandingaccounting.org/glossary/o/#obligations-subject-to-compromise "Includes all prepetition liabilities (claims) except those that will not be impaired under the plan, such as claims in which the value of the security interest is greater than the claim.") 3. c [Undersecured claim](https://asc.understandingaccounting.org/glossary/u/#undersecured-claim "A secured claim whose collateral is worth less than the amount of the claim. Sometimes referred to as an undersecured claim liability."). Source downloaded (UTC): 2026-09-10T02:02:57.483Z to 2026-09-10T02:02:57.483Z Record version: sha256:e2828a2048c3e189785e358a12d36ba37803ed7bf9034f9f7264f3ea9ea6e1fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/852/10/#10-objectives) SEC content: no ##### [852-10-10-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-10-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:02:57.483Z to 2026-09-10T02:02:57.483Z Record version: sha256:110bed47ebbca5645e0b59dc23a2d44327665a3b81a83d35d6e6f0d9c4476a6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Presenting an entity's financial evolution in its financial statements during a [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11.") [reorganization proceeding](https://asc.understandingaccounting.org/glossary/r/#reorganization-proceeding "A Chapter 11 case from the time at which the petition is filed until the plan is confirmed.") is an objective of the guidance in this Subtopic. Source downloaded (UTC): 2026-09-10T02:03:01.101Z to 2026-09-10T02:03:01.101Z Record version: sha256:fa37945d1089ca3b24391391fb10a1718a6b99e7cf51cdfb8e5207fe3a7287a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/852/10/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [852-10-15-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:01.101Z to 2026-09-10T02:03:01.101Z Record version: sha256:05b06e5386a22190132bdad11f26b4a86dd6dc4ce5b779ddf6406b32db1ba946 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on financial reporting by entities that have filed petitions with the [Bankruptcy Court](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-court "The United States Bankruptcy Court is an adjunct of the United States District Courts. Under the jurisdiction of the District Court, the Bankruptcy Court is generally responsible for cases filed under Chapters 7, 11, 12, and 13 of the Bankruptcy Code.") and expect to reorganize as going concerns under Chapter 11 of title 11 of the United States Code. The guidance in this Subtopic applies to all entities except governmental organizations. #### Transactions ##### [852-10-15-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:01.101Z to 2026-09-10T02:03:01.101Z Record version: sha256:d93a0f9975e4bcb9b320836e0305743c45217b20d7ca1d9d55239a6230769ea2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following transactions and activities: 1. a Reorganizations by entities that expect to reorganize as a going concern under [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11.") 2. b Reorganizations by entities upon emergence from Chapter 11 under confirmed plans. ##### [852-10-15-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:01.101Z to 2026-09-10T02:03:01.101Z Record version: sha256:6b109599fb8ab198dd8c941a234e217c40e3b3ab591014423eb7010c1bd7330a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Debt restructurings outside of Chapter 11 2. b Reorganization activities consisting of liquidation or adoption of plans of liquidation under the [Bankruptcy Code](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-code "A federal statute, enacted October 1, 1979, as title 11 of the United States Code by the Bankruptcy Reform Act of 1978, that applies to all cases filed on or after its enactment and that provides the basis for the current federal bankruptcy system."). Source downloaded (UTC): 2026-09-10T02:03:08.094Z to 2026-09-10T02:03:08.094Z Record version: sha256:c216638c7cb66bbb1db172b2aa00e6e7f86337fb19ce837bb5e40cbeae43e14b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/852/10/#25-recognition) SEC content: no ##### [852-10-25-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:08.094Z to 2026-09-10T02:03:08.094Z Record version: sha256:3cfd4e79b33bea890b467c70231b6ae6c61402c6dec86104a86427bf515bf7ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As explained in paragraph [852-10-45-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-1), entering a [reorganization proceeding](https://asc.understandingaccounting.org/glossary/r/#reorganization-proceeding "A Chapter 11 case from the time at which the petition is filed until the plan is confirmed."), although a significant event, does not ordinarily affect or change the application of generally accepted accounting principles (GAAP) followed by the entity in the preparation of its financial statements. However, the needs of financial statement users change, and thus changes in the reporting practices previously followed by the entity are necessary. ##### [852-10-25-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:08.094Z to 2026-09-10T02:03:08.094Z Record version: sha256:ec29c52baf517bebcd52c89ac6125b61bc82f5bd1d205402bcd2a8dd96562298 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Section 852-10-45 for financial statement presentation guidance applicable to entities during and after reorganization proceedings. Source downloaded (UTC): 2026-09-10T02:03:09.960Z to 2026-09-10T02:03:09.960Z Record version: sha256:b28dfde92568998b899b4d2c4811340eb915239987c5a7b83577cdba37361ab9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/852/10/#30-initial-measurement) SEC content: no ##### [852-10-30-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:09.960Z to 2026-09-10T02:03:09.960Z Record version: sha256:d77d25f949dced3eadf678c7ed7fd77966bb606f5b03afe77fe11db3308bdbae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As explained in paragraph [852-10-45-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-1), entering a [reorganization proceeding](https://asc.understandingaccounting.org/glossary/r/#reorganization-proceeding "A Chapter 11 case from the time at which the petition is filed until the plan is confirmed."), although a significant event, does not ordinarily affect or change the application of generally accepted accounting principles (GAAP) followed by the entity in the preparation of its financial statements. However, the needs of financial statement users change, and thus changes in the reporting practices previously followed by the entity are necessary. ##### [852-10-30-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:09.960Z to 2026-09-10T02:03:09.960Z Record version: sha256:45327a8f0d0903da5e6926167d4421b96d235c7649d5b2ad2ed4435073254cc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Section 852-10-45 for financial statement presentation guidance applicable to entities during and after reorganization proceedings. Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:3667eaf103b768134c2fbf1017a743397252e1f4a0c2f1258fc77202d4cd3d80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/852/10/#45-other-presentation-matters) SEC content: no #### Financial Reporting during Reorganization Proceedings ##### [852-10-45-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:5b29b0c7905113ee4033309e04a3e01b729e51dafd993c46a60306846362ed59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entering a [reorganization proceeding](https://asc.understandingaccounting.org/glossary/r/#reorganization-proceeding "A Chapter 11 case from the time at which the petition is filed until the plan is confirmed."), although a significant event, does not ordinarily affect or change the application of generally accepted accounting principles (GAAP) followed by the entity in the preparation of its financial statements. However, the needs of financial statement users change, and thus changes in the reporting practices previously followed by the entity are necessary. ##### [852-10-45-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:65d38b52f2b2dd889d290bca6d46b3d8957842aba24511f39939df6170a5a1f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purpose of presenting an entity's financial evolution during a [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11.") reorganization (see paragraph [852-10-10-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-10-1)), the financial statements for periods including and after filing the Chapter 11 [petition](https://asc.understandingaccounting.org/glossary/p/#petition "A document filed in a court of bankruptcy, initiating proceedings under the Bankruptcy Code.") shall distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. ##### [852-10-45-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:d8f9fbed75e5108df5c7423541662c2f52cecb2733ab5a9e700d16c2369c621f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [852-10-55-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-2)) provides an illustration of financial statements and notes thereto for an entity operating under Chapter 11. ##### [852-10-45-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:7bb6e56b1e4a64632c45b2581030ed699a4e2d743d8bb3005fb3a40b716ec0c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The balance sheet of an entity in Chapter 11 shall distinguish [prepetition liabilities](https://asc.understandingaccounting.org/glossary/p/#prepetition-liabilities "Liabilities that were incurred by an entity before its filing of a petition for protection under the Bankruptcy Code including those considered by the Bankruptcy Court to be prepetition claims, such as a rejection of a lease for real property.") subject to compromise from those that are not (such as fully secured liabilities that are expected not to be compromised) and [postpetition liabilities](https://asc.understandingaccounting.org/glossary/p/#postpetition-liabilities "Liabilities incurred after the filing of a petition that are not associated with prebankruptcy events. Thus, these liabilities are not considered prepetition liabilities."). Liabilities that may be affected by the plan shall be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there is uncertainty about whether a [secured claim](https://asc.understandingaccounting.org/glossary/s/#secured-claim "A liability that is secured by collateral. A fully secured claim is one in which the value of the collateral is greater than the amount of the claim.") is undersecured, or will be impaired under the [plan of reorganization](https://asc.understandingaccounting.org/glossary/p/#plan-of-reorganization "An agreement formulated in Chapter 11 proceedings under the supervision of the Bankruptcy Court that enables the debtor to continue in business. The plan, once confirmed, may affect the rights of undersecured creditors, secured creditors, and stockholders as well as those of unsecured creditors. Before a plan is confirmed by the Bankruptcy Court, it must comply with general provisions of the Bankruptcy Code. Those provisions mandate, for example, that the plan is feasible, the plan is in the best interest of the creditors, and, if an impaired class does not accept the plan, the plan must be determined to be fair and equitable before it can be confirmed."), the entire amount of the [claim](https://asc.understandingaccounting.org/glossary/c/#claim "As defined by Section 101(4) of the Bankruptcy Code, a right to payment, regardless of whether the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, secured, or unsecured, or a right to an equitable remedy for breach of performance if such breach results in a right to payment, regardless of whether the right is reduced to a fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured right.") shall be included with prepetition claims subject to compromise; such a claim shall not be reclassified unless it is subsequently determined that the claim is not subject to compromise. ##### [852-10-45-5](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:6e6fdadde1b0c824ff7c5efcd49b288285ee49f921f9e556a4181d6c3a2e580d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prepetition liabilities, including claims that become known after a petition is filed, shall be reported on the basis of the expected amount of the [allowed claims](https://asc.understandingaccounting.org/glossary/a/#allowed-claim "The amount allowed by the Bankruptcy Court as a claim against the estate. This amount may differ from the actual settlement amount.") in accordance with Subtopic 450-20, as opposed to the amounts for which those allowed claims may be settled. Once these claims satisfy the accrual provisions of that Subtopic, they shall be recorded in the accounts in accordance with this paragraph. Paragraph [852-10-50-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-2) notes that claims not subject to reasonable estimation are required to be disclosed in the notes to financial statements. ##### [852-10-45-6](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:400a863bbcb73116b2cb47a3d0fd47b418882e1bdcc5983808f87d914929187e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Debt discounts or premiums as well as debt issue costs shall be viewed as valuations of the related debt. When the debt has become an allowed claim and the allowed claim differs from the net carrying amount of the debt, the recorded amount shall be adjusted to the amount of the allowed claim (thereby adjusting existing discounts or premiums, and deferred issue costs to the extent necessary to report the debt at this allowed amount). The gain or loss resulting from the entries to record the adjustment shall be classified as reorganization items, as discussed in paragraph [852-10-45-9](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-9). Premiums and discounts as well as debt issuance cost on debts that are not subject to compromise, such as fully secured claims, shall not be adjusted. ##### [852-10-45-7](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:51b2739b313a4c7800334bca4b6e03ef05f8b76258680139217f2c40b29b380e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [852-10-45-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-4) addresses the separation of liabilities subject to compromise from those that are not. Circumstances arising during reorganization proceedings may require a change in the classification of liabilities between those subject to compromise and those not subject to compromise. Liabilities not subject to compromise shall be further segregated into current and noncurrent classifications if the entity presents a classified balance sheet. ##### [852-10-45-8](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:5e46d89ca98ece0c4aef80ff24df64bb96b613624ed3a011839fa5304ab5a5a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 470-10-45 requires current liabilities classification in a classified balance sheet for long-term liabilities that, by their terms, are due on demand or will be due on demand within one year, or the operating cycle, if longer. This classification requirement also applies to long-term liabilities that are or will be callable by the creditor because of a violation of a provision of the debt agreement. The [automatic stay provisions](https://asc.understandingaccounting.org/glossary/a/#automatic-stay-provisions "Provisions causing the filing of a petition under the Bankruptcy Code to automatically stay virtually all actions of creditors to collect prepetition debts. As a result of the stay, no party, with minor exceptions, having a security or adverse interest in the debtor's property can take any action that will interfere with the debtor or the debtor's property, regardless of where the property is located or who has possession, until the stay is modified or removed.") of Chapter 11 make it unnecessary to reclassify prepetition long-term liabilities even though prepetition creditors might demand payment or there is a violation of a covenant in the debt agreement. ##### [852-10-45-9](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:b014dea8afff88d9e463beba391cdcea651208546db6bf5446a9d3d0cb37dd0e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The statement of operations shall portray the results of operations of the reporting entity while it is in Chapter 11. Revenues, expenses (including professional fees), realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business shall be reported separately as [reorganization items](https://asc.understandingaccounting.org/glossary/r/#reorganization-items "Items of income, expense, gain, or loss that are realized or incurred by an entity because it is in reorganization."), except for those required to be reported as discontinued operations in conformity with Subtopic 205-20. ##### [852-10-45-10](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:2e47ace6cb8fc3a2585e4437c6e8cdff66c73cd62b0741e2f34d697bfcc9bdac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It is not appropriate to defer professional fees and similar types of expenditures until the plan is confirmed and then reduce gain from debt discharge to the extent of the previously deferred expenses. It is also not appropriate to accrue professional fees and similar types of expenditures upon the filing of the Chapter 11 petition. Rather, because professional fees and similar types of expenditures directly relating to the Chapter 11 proceeding do not result in assets or liabilities, they shall be expensed as incurred and reported as reorganization items. ##### [852-10-45-11](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:4b76420e4a51c473b5cf06bf86b1d2b64bfbb786e38ead6027cb62ea07318e6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest expense shall be reported only to the extent that it will be paid during the proceeding or that it is probable that it will be an allowed priority, secured, or unsecured claim. Interest expense is not a reorganization item. ##### [852-10-45-12](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:fcde884d1d03931fbeaffbc101972a88467ac62c85ce02b7505bd3d3e13b012b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest income earned by an entity in Chapter 11 that it would not have earned but for the proceeding, normally all interest income, shall be reported as a reorganization item. ##### [852-10-45-13](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:e268563cd9dccd13c3e770d6d5481aeef5659af66922ff696756dd7bb15bfb28 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Reorganization items shall be presented separately within the operating, investing, and financing categories of the statement of cash flows. This presentation can be better accomplished by the use of the direct method of presenting the statement. Paragraph [230-10-45-25](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-25) lists the operating items that shall be reported separately when the direct method is used. That paragraph encourages further breakdown of those operating items if the entity considers such a breakdown meaningful and feasible. Further identification of cash flows from reorganization items should be provided to the extent feasible. For example, interest received might be segregated between estimated normal recurring interest received and interest received on cash accumulated because of the reorganization. If the indirect method is used, details of operating cash receipts and payments resulting from the reorganization shall be disclosed in a supplementary schedule or in the notes to financial statements. (See paragraph [852-10-50-6A](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-6A).) ##### [852-10-45-14](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:c8a358365e6debb9ece089ae129ae7c5a7976e9365b17898c094c1511f9c4c71 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consolidated financial statements that include one or more entities in reorganization proceedings and one or more entities not in reorganization proceedings shall include condensed combined financial statements of the entities in reorganization proceedings. The combined financial statements shall be prepared on the same basis as the consolidated financial statements. ##### [852-10-45-15](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:ff5cd6b84d4dc465208049b1a616a7db1cdb328bc7d3c6c63a002525b8d38538 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition to making the required paragraph [852-10-50-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-4) disclosures, the propriety of the carrying amounts of intra-entity receivables from entities in Chapter 11 shall be evaluated. ##### [852-10-45-16](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:ab4bbada48d79d82a9dff09e1734944270d8254513f355c4c2a3b2ca4e4dc156 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Earnings per share (EPS) shall be reported, if required, in conformity with Topic 260. If it is probable that the plan will require the issuance of common stock or common stock equivalents, thereby diluting current equity interests, that fact shall be disclosed. #### Financial Reporting When Entities Emerge from Chapter 11 Reorganization ##### [852-10-45-17](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:cdfe596a58851f4e7c802cd98bf4bbabc22a20237d15e5d5d4f5a3b586fc3ec8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities whose plans have been confirmed by the court and have thereby emerged from Chapter 11 shall apply the reporting principles in paragraphs [852-10-45-19 through 45-29](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-19) as of the confirmation date or as of a later date, as discussed in the following paragraph, when all material conditions precedent to the plan's becoming binding are resolved. ##### [852-10-45-18](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:477381f6160a046c234973e90c210ec1b38887c612cf0c92e31f833479c79a75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effects of a plan should be included in the entity's financial statements as of the date the plan is confirmed. However, inclusion shall be delayed to a date not later than the effective date if there is a material unsatisfied condition precedent to the plan's becoming binding on all the parties in interest or if there is a stay pending appeal. That might occur, for example, if obtaining financing for the plan or for the transfer of material assets to the debtor by a third party is a condition to the plan's becoming effective. Financial statements prepared as of the date after the parties in interest have approved a plan through the voting process, and issued after the plan has been confirmed by the court, shall report the effects of the plan if there are no material unsatisfied conditions. ##### [852-10-45-19](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:6982876c52515f62103111960df9c53f43f4b7c8280b515d8c608a52ae0a1f71 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the reorganization value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all postpetition liabilities and allowed claims, and if holders of existing voting shares immediately before confirmation receive less than 50 percent of the voting shares of the emerging entity, the entity shall adopt fresh-start reporting upon its emergence from Chapter 11. The loss of control contemplated by the plan must be substantive and not temporary. That is, the new controlling interest must not revert to the shareholders existing immediately before the plan was filed or confirmed. ##### [852-10-45-20](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:75cf663ccc6e4ef487214c7b672016625248ed0713cfdf772f95082539363cd0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities that adopt fresh-start reporting in conformity with the preceding paragraph shall apply the following principles: 1. a The reorganization value of the entity shall be assigned to the entity's assets and liabilities in conformity with the procedures specified by Subtopic 805-20. If any portion of the reorganization value cannot be attributed to specific tangible or identified intangible assets of the emerging entity, such amounts shall be reported as goodwill in accordance with paragraph [350-20-25-2](https://asc.understandingaccounting.org/asc/350/20/#350-20-25-2). 2. b [Subparagraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). 3. c Deferred taxes shall be determined under the requirements of paragraph [852-740-45-1](https://asc.understandingaccounting.org/asc/740/852/#740-852-45-1). 4. d [Subparagraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [852-10-45-21](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:beeea83f1fd56389a099a3a43c9e5c9a43f46906682b060353067d3d07f7c32a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The financial statements of the entity as of and for the period immediately preceding the date determined in conformity with the guidance in paragraph [852-10-45-17](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-17) shall reflect all activity through that date in conformity with the guidance in paragraphs [852-10-45-1 through 45-16](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-1) . Additionally, the effects of the adjustments on the reported amounts of individual assets and liabilities resulting from the adoption of fresh-start reporting and the effects of the forgiveness of debt shall be reflected in the predecessor entity's final statement of operations. Forgiveness of debt, if any, shall be reported as an extinguishment of debt and classified in accordance with Subtopic 220-20. Adopting fresh-start reporting results in a new reporting entity with no beginning retained earnings or deficit. When fresh-start reporting is adopted, the notes to the initial fresh-start financial statements shall disclose the additional information identified in paragraph [852-10-50-7](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-7). ##### [852-10-45-22](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:de8915571bf7964a3a8edae550347f6e7faa0e691af397becfd4b1b37c1ece8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [852-10-45-23](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:f7439185b0417227285c2f1835c3b55728322e2dca8b9189f7294c1b95099b7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [852-10-45-24](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:a31e408e57a97d8f2b241a529e087f405cb3a5955222de3003ba93c03d619130 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [852-10-45-25](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:96915be86478abc9aac5248c9cab720e01240abf686517342c10dfe026f75c82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [852-10-45-26](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:d503d9f4c620c9c1df66d6a45db8e3214c071a7885e6dfaca28eca89c5d24d19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Fresh-start financial statements prepared by entities emerging from Chapter 11 will not be comparable with those prepared before their plans were confirmed because they are, in effect, those of a new entity. Thus, comparative financial statements that straddle a confirmation date shall not be presented. ##### [852-10-45-27](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:e79915791d32e791afe8ee0c39fe1b08d51787c07cbcfb288aeac7e8c08cdb18 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regulatory agencies may require the presentation of predecessor financial statements. However, such presentations shall not be viewed as a continuum because the financial statements are those of a different reporting entity and are prepared using a different basis of accounting, and, therefore, are not comparable. Attempts to disclose and explain exceptions that affect comparability would likely result in reporting that is so unwieldy it would not be useful. ##### [852-10-45-28](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:291e510f79f24472480ae95a45af691d76ccad804900916e8d9cac6dd3ecff9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 2 (see paragraph [852-10-55-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-4)) provides an illustration of fresh-start reporting and the related illustrative notes to financial statements. ##### [852-10-45-29](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-29) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:11.975Z to 2026-09-10T02:03:11.975Z Record version: sha256:ecde9fbcc516c1ae1f7c8d00a42021a968c4f76834a5ed273a3fa95759d86f44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities emerging from Chapter 11 that do not meet the criteria in paragraph [852-10-45-19](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-19) do not qualify for fresh-start reporting. Liabilities compromised by confirmed plans shall be stated at present values of amounts to be paid, determined at appropriate current interest rates. Forgiveness of debt, if any, shall be reported as an extinguishment of debt and classified in accordance with Subtopic 220-20. Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:fc66a2919fa9c3c32fd4304751d3b477a81785f3e11dbc55c305e1dd3bcc65b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/852/10/#50-disclosure) SEC content: no ##### [852-10-50-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:35985804b2d5f6772c17670e74accfab6d97e68af70e8601469c1a1994e1aecf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides incremental disclosure guidance for entities with transactions within the scope of this Subtopic. It is incremental to disclosure guidance otherwise applicable to an entity under other generally accepted accounting principles (GAAP). #### Financial Reporting during Reorganization Proceedings ##### [852-10-50-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:94604ad5a5638be77899df07c6face6bd176e2522cb5a453471f50ca4751399d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The notes to financial statements of an entity in Chapter 11 shall disclose both of the following: 1. a [Claims](https://asc.understandingaccounting.org/glossary/c/#claim "As defined by Section 101(4) of the Bankruptcy Code, a right to payment, regardless of whether the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, secured, or unsecured, or a right to an equitable remedy for breach of performance if such breach results in a right to payment, regardless of whether the right is reduced to a fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured right.") not subject to reasonable estimation based on the provisions of Subtopic 450-20 2. b The principal categories of the claims subject to compromise. ##### [852-10-50-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:604d5440151671640f2daa70a6ae14d4ec4da1899e0c9d5a29d0e6c573974a00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The extent to which reported interest expense differs from stated contractual interest shall be disclosed. It may be appropriate to disclose this parenthetically on the face of the statement of operations. ##### [852-10-50-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:ab601e37ebd8bdc968e8c5f6beea886ff594923a1a8cf62a75e5ef68b73ed3d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Intra-entity receivables and payables of entities in reorganization proceedings shall be disclosed in the condensed combined financial statements referred to in paragraph [852-10-45-14](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-14). ##### [852-10-50-5](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:783a5e4cb061214bb297bf731d4522c57049d1f46a974c182f393899e6e9ff24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [852-10-45-16](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-16) identifies a situation in which disclosure of a probable issuance of common stock or common stock equivalents is required. ##### [852-10-50-6](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:73354fdcd1611f2efdc5e6a6b71a9ed0ea2f7b04e544a36218596de3c6f36734 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [852-10-55-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-2)) provides an illustration of financial statements and notes thereto for an entity operating under [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11."). ##### [852-10-50-6A](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-6A) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:4b048d6f5bdf892169d5ccd957e8ccf42bbda9992bcebf4fbeb8a802d626d97b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the indirect method is used to prepare the statement of cash flows, details of operating cash receipts and payments resulting from the reorganization shall be disclosed in a supplementary schedule or in the notes to financial statements. (See paragraph [852-10-45-13](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-13).) #### Financial Reporting When Entities Emerge from Chapter 11 Reorganization and Adopt Fresh-Start Reporting ##### [852-10-50-7](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:90a4c7a67260e011b3f7e44f217516aee5bc811e627ab3f35b83e7604a1153d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [852-10-45-21](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-21) requires additional information to be disclosed in the notes to the initial fresh-start financial statements when fresh-start reporting is adopted. That additional information consists of all of the following: 1. a Adjustments to the historical amounts of individual assets and liabilities 2. b The amount of debt forgiveness 3. c Significant matters relating to the determination of [reorganization value](https://asc.understandingaccounting.org/glossary/r/#reorganization-value "The value attributed to the reconstituted entity, as well as the expected net realizable value of those assets that will be disposed of before reconstitution occurs. Therefore, this value is viewed as the value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring."), including all of the following: 1. 1 The method or methods used to determine reorganization value and factors such as discount rates, tax rates, the number of years for which cash flows are projected, and the method of determining [terminal value](https://asc.understandingaccounting.org/glossary/t/#terminal-value "A component of reorganization value.Reorganization value calculated based on the discounting of cash flows normally consists of three parts; the discounted cash flows determined for the forecast period, the residual value or terminal value, and the current value of any excess working capital or other assets that are not needed in reorganization. Terminal or residual value represents the present value of the business attributable to the period beyond the forecast period.") 2. 2 Sensitive assumptions—that is, assumptions about which there is a reasonable possibility of the occurrence of a variation that would have significantly affected measurement of reorganization value 3. 3 Assumptions about anticipated conditions that are expected to be different from current conditions, unless otherwise apparent. ##### [852-10-50-8](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:15.208Z to 2026-09-10T02:03:15.208Z Record version: sha256:03314b1160ae6c629a7358019b88cdb7e66d440dc3b9ece10a75f810f8e800d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:9e749e4676c3957e657fcb5a7f2c21cfc32a8e2eda7519b916fab60e70d409b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/852/10/#55-implementation-guidance-and-illustrations) SEC content: no ##### [852-10-55-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:740df714358240b92b41b9aad9695c86e36f377a24a610007c675184056d527e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section is an integral part of the requirements of this Subtopic. This Section provides illustrations that address the application of requirements to specific aspects of accounting and reporting for entities in reorganization under Chapter 11 of the [Bankruptcy Code](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-code "A federal statute, enacted October 1, 1979, as title 11 of the United States Code by the Bankruptcy Reform Act of 1978, that applies to all cases filed on or after its enactment and that provides the basis for the current federal bankruptcy system."). The illustrations that follow may be based on provisions of law that are subject to change. These assumptions about the law are for illustrative purposes only. #### Illustrations ##### [852-10-55-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:528b4b1966e0ff9ff19e95768019f5c82d4374088e8ca2126589a2e4e5ed4679 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates the guidance in paragraphs [852-10-45-1 through 45-13](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-1) and [852-10-50-2 through 50-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-50-2) relating to financial statement reporting practices during the period that an entity is in reorganization. Illustrative financial statements and accompanying notes follow. ##### [852-10-55-3](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-3) Pending content: yes Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:1f72297c5362ae4a0eb327be380c49e2bb41baccf51dc48b035665066a8d1d37 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. XYZ Company is a manufacturing concern headquartered in Tennessee, with a fiscal year ending on December 31. On January 10, 19X1, XYZ filed a [petition](https://asc.understandingaccounting.org/glossary/p/#petition "A document filed in a court of bankruptcy, initiating proceedings under the Bankruptcy Code.") for relief under Chapter 11 of the federal bankruptcy laws. The following financial statements (balance sheet and statements of operations and cash flows) are presented as of and for the year ended December 31. - Illustrative Financial Statements and Notes to Financial Statements for an Entity Operating Under Chapter 11 - ![](https://asc.understandingaccounting.org/asc-img/GUID-CE6E1D02-E98F-4555-9396-4CF95282FD22-low.gif) XYZ Company (Debtor in Possession) Balance Sheet "December 31, 19X1" Assets (000s) Current assets Cash $110 "Accounts receivable, net" 300 Inventory 250 Other current assets 30 Total current assets 690 "Property, plant and equipment, net" 430 Goodwill 210 Total assets " $1,330 " Liabilities and Shareholders' Deficit (000s) Liabilities not subject to compromise current liabilities: Short-term borrowings $25 Accounts payable—trade 200 Other liabilities 50 Total current liabilities 275 Liabilities subject to compromise " 1,100 " (a) Total liabilities " 1,375 " shareholders' (deficit) Preferred stock 325 Common stock 75 Retained earnings (deficit) (445) (45) Total Liabilities & Shareholders' (Deficit) " $1,330 " (a) Liabilities subject to compromise consist of the following: "Secured debt, 14%, secured by first mortgage on building" " $300,000 " (b) Priority tax claims " 50,000 " "Senior subordinated secured notes, 15%" " 275,000 " Trade and other miscellaneous claims " 225,000 " "Subordinated debentures, 17%" " 250,000 " " $1,100,000 " (b) "The secured debt in this case should be considered, due to various factors, subject to compromise." The accompanying notes are an integral part of the financial statements. - ![](https://asc.understandingaccounting.org/asc-img/GUID-57CE05EF-CD69-4F6B-AB7E-600265574C2C-low.gif) XYZ Company (Debtor-in-Possession) Statement of Operations "For the Year Ended December 31, 19X1" (000s) 19X1 Revenues: Sales " $2,400 " Cost and expenses: Cost of goods sold " 1,800 " "Selling, operating and administrative" 550 Interest (contractual interest $5) 3 " 2,353 " Earnings before reorganization items and income tax benefit 47 Reorganization items: Loss on disposal of facility (60) Professional fees (50) Provision for rejected executory contracts (10) Interest earned on accumulated cash resulting from Chapter 11 proceeding 1 (119) Loss before income tax benefit and discontinued operations (72) Income tax benefit 10 Loss before discontinued operations (62) Discontinued operations: Loss from operations of discontinued products segment (56) Net loss $(118) Loss per common share: Loss before discontinued operations $(0.62) Discontinued operations $(0.56) Net loss $(1.18) The accompanying notes are an integral part of the financial statements. - ![](https://asc.understandingaccounting.org/asc-img/GUID-A4F01AFA-AA43-4469-8DDF-3A86AC2340A7-low.gif) XYZ Company (Debtor-in-Possession) Statement of Cash Flows "For the Year Ended December 31, 19X1" Increase in Cash and Cash Equivalents (000s) 19X1 Cash flows from operating activities: Cash received from customers " $2,220 " Cash paid to suppliers and employees " (2,070)" Interest paid (3) Net cash provided by operating activities before reorganization items 147 Operating cash flows from reorganization items: Interest received on cash accumulated because of the Chapter 11 proceeding 1 Professional fees paid for services rendered in connection with the Chapter 11 proceeding (50) Net cash used by reorganization items (49) Net cash provided by operating activities 98 Cash flows from investing activities: Capital expenditures (5) Proceeds from sale of facility due to Chapter 11 proceeding 40 Net cash provided by investing activities 35 Cash flow used by financing activities: Net borrowings under short-term credit facility (post petition) 25 Repayment of cash overdraft (45) Principal payments on prepetition debt authorized by court (3) Net cash provided by financing activities (23) Net increase in cash and cash equivalents 110 Cash and cash equivalents at beginning of year - Cash and cash equivalents at end of year $110 Reconciliation of net loss to net cash provided by operating activities Net loss $(118) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 20 Loss on disposal of facility 60 Provision for rejected executory contracts 10 Loss on discontinued operations 56 Increase in postpetition payables and other liabilities 250 Increase in accounts receivable (180) Net cash provided by operating activities $98 The accompanying notes are an integral part of the financial statements. - XYZ Company Notes to Financial Statements December 31, 19X1 - Note X—Petition for Relief Under Chapter 11 - On January 10, 19X1, XYZ Company (the Debtor) filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Western District of Tennessee. Under Chapter 11, certain claims against the Debtor in existence before the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor-in-possession. These claims are reflected in the December 31, 19X1, balance sheet as liabilities subject to compromise. Additional claims (liabilities subject to compromise) may arise after the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtor's assets (secured claims) also are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on the Debtor's property, plant, and equipment. - The Debtor received approval from the Bankruptcy Court to pay or otherwise honor certain of its prepetition obligations, including employee wages and product warranties. The Debtor has determined that there is insufficient collateral to cover the interest portion of scheduled payments on its prepetition debt obligations. Contractual interest on those obligations amounts to $5,000, which is $2,000 in excess of reported interest expense; therefore, the debtor has discontinued accruing interest on these obligations. See Note X in Example 2 (paragraph [852-10-55-11](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-11)) for a discussion of the credit arrangements entered into after the Chapter 11 filings. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)XYZ Company is a manufacturing concern headquartered in Tennessee, with a fiscal year ending on December 31. On January 10, 19X1, XYZ filed a [petition](https://asc.understandingaccounting.org/glossary/p/#petition "A document filed in a court of bankruptcy, initiating proceedings under the Bankruptcy Code.") for relief under Chapter 11 of the federal bankruptcy laws. The following financial statements (balance sheet and statements of operations and cash flows) are presented as of and for the year ended December 31. - Illustrative Financial Statements and Notes to Financial Statements for an Entity Operating Under Chapter 11 - ![](https://asc.understandingaccounting.org/asc-img/GUID-CE6E1D02-E98F-4555-9396-4CF95282FD22-low.gif) XYZ Company (Debtor in Possession) Balance Sheet "December 31, 19X1" Assets (000s) Current assets Cash $110 "Accounts receivable, net" 300 Inventory 250 Other current assets 30 Total current assets 690 "Property, plant and equipment, net" 430 Goodwill 210 Total assets " $1,330 " Liabilities and Shareholders' Deficit (000s) Liabilities not subject to compromise current liabilities: Short-term borrowings $25 Accounts payable—trade 200 Other liabilities 50 Total current liabilities 275 Liabilities subject to compromise " 1,100 " (a) Total liabilities " 1,375 " shareholders' (deficit) Preferred stock 325 Common stock 75 Retained earnings (deficit) (445) (45) Total Liabilities & Shareholders' (Deficit) " $1,330 " (a) Liabilities subject to compromise consist of the following: "Secured debt, 14%, secured by first mortgage on building" " $300,000 " (b) Priority tax claims " 50,000 " "Senior subordinated secured notes, 15%" " 275,000 " Trade and other miscellaneous claims " 225,000 " "Subordinated debentures, 17%" " 250,000 " " $1,100,000 " (b) "The secured debt in this case should be considered, due to various factors, subject to compromise." The accompanying notes are an integral part of the financial statements. - ![](https://asc.understandingaccounting.org/asc-img/GUID-57CE05EF-CD69-4F6B-AB7E-600265574C2C-low.gif) XYZ Company (Debtor-in-Possession) Statement of Operations "For the Year Ended December 31, 19X1" (000s) 19X1 Revenues: Sales " $2,400 " Cost and expenses: Cost of goods sold " 1,800 " "Selling, operating and administrative" 550 Interest (contractual interest $5) 3 " 2,353 " Earnings before reorganization items and income tax benefit 47 Reorganization items: Loss on disposal of facility (60) Professional fees (50) Provision for rejected executory contracts (10) Interest earned on accumulated cash resulting from Chapter 11 proceeding 1 (119) Loss before income tax benefit and discontinued operations (72) Income tax benefit 10 Loss before discontinued operations (62) Discontinued operations: Loss from operations of discontinued products segment (56) Net loss $(118) Loss per common share: Loss before discontinued operations $(0.62) Discontinued operations $(0.56) Net loss $(1.18) The accompanying notes are an integral part of the financial statements. - ![](https://asc.understandingaccounting.org/asc-img/GUID-B9C5A640-DED9-4CA2-8978-6B7A29BF9B58-low.gif) XYZ Company (Debtor-in-Possession) Statement of Cash Flows "For the Year Ended December 31, 19X1" Increase in Cash and Cash Equivalents (000s) 19X1 Cash flows from operating activities: Cash received from customers " $2,220 " Cash paid to suppliers and employees " (2,070)" Interest paid (3) Net cash provided by operating activities before reorganization items 147 Operating cash flows from reorganization items: Interest received on cash accumulated because of the Chapter 11 proceeding 1 Professional fees paid for services rendered in connection with the Chapter 11 proceeding (50) Net cash used in reorganization items (49) Net cash provided by operating activities 98 Cash flows from investing activities: Capital expenditures (5) Proceeds from sale of facility due to Chapter 11 proceeding 40 Net cash provided by investing activities 35 Cash flows from financing activities: Net borrowings under short-term credit facility (post petition) 25 Repayment of cash overdraft (45) Principal payments on prepetition debt authorized by court (3) Net cash used in financing activities (23) Net increase in cash and cash equivalents 110 Cash and cash equivalents at beginning of year - Cash and cash equivalents at end of year $110 Reconciliation of net loss to net cash provided by operating activities Net loss $(118) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 20 Loss on disposal of facility 60 Provision for rejected executory contracts 10 Loss on discontinued operations 56 Increase in postpetition payables and other liabilities 250 Increase in accounts receivable (180) Net cash provided by operating activities $98 The accompanying notes are an integral part of the financial statements. - XYZ Company Notes to Financial Statements December 31, 19X1 - Note X—Petition for Relief Under Chapter 11 - On January 10, 19X1, XYZ Company (the Debtor) filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Western District of Tennessee. Under Chapter 11, certain claims against the Debtor in existence before the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor-in-possession. These claims are reflected in the December 31, 19X1, balance sheet as liabilities subject to compromise. Additional claims (liabilities subject to compromise) may arise after the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtor's assets (secured claims) also are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on the Debtor's property, plant, and equipment. - The Debtor received approval from the Bankruptcy Court to pay or otherwise honor certain of its prepetition obligations, including employee wages and product warranties. The Debtor has determined that there is insufficient collateral to cover the interest portion of scheduled payments on its prepetition debt obligations. Contractual interest on those obligations amounts to $5,000, which is $2,000 in excess of reported interest expense; therefore, the debtor has discontinued accruing interest on these obligations. See Note X in Example 2 (paragraph [852-10-55-11](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-11)) for a discussion of the credit arrangements entered into after the Chapter 11 filings. ##### [852-10-55-4](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:33692b30462d6468de5a551f343d174ba2e3eb9ce8035545176fba07f0eb2833 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the fresh-start-related guidance in paragraphs [852-10-45-19 through 45-27](https://asc.understandingaccounting.org/asc/852/10/#852-10-45-19) and uses the same hypothetical XYZ Company as in Example 1 (see paragraph [852-10-55-2](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-2)). Illustrative accounting and associated note disclosures follow. ##### [852-10-55-5](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:51693b96eb963bc41bb3c24df1fb1d6bae8651b657159779b3762ba094c54dbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Bankruptcy Court confirmed XYZ's plan of reorganization as of June 30, 19X2. It was determined that XYZ's reorganization value computed immediately before June 30, 19X2, the date of plan confirmation, was $1,300,000, which consisted of the following. - ![](https://asc.understandingaccounting.org/asc-img/GUID-31107C57-9EFB-498F-955F-204148424F4F-low.gif) Cash in excess of normal operating requirements generated by operations " $150,000 " Net realizable value of asset dispositions " 75,000 " Present value of discounted cash flows of the emerging entity " 1,075,000 " Reorganization value " $1,300,000 " ##### [852-10-55-6](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:89089ce1bd822bbe7efe5e2a04abab60e63b612e11d0f0d7d29cfe06cdfb66a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. XYZ Company adopted fresh-start reporting because holders of existing voting shares immediately before filing and confirmation of the plan received less than 50% of the voting shares of the emerging entity and its reorganization value is less than its postpetition liabilities and [allowed claims](https://asc.understandingaccounting.org/glossary/a/#allowed-claim "The amount allowed by the Bankruptcy Court as a claim against the estate. This amount may differ from the actual settlement amount."), as shown in the following table. - ![](https://asc.understandingaccounting.org/asc-img/GUID-AC1B4CC4-0E30-487B-A3C7-09907D7F6468-low.gif) Postpetition current liabilities " $300,000 " Liabilities deferred pursuant to Chapter 11 proceeding " 1,100,000 " Total postpetition liabilities and allowed claims " 1,400,000 " Reorganization value " (1,300,000)" Excess of liabilities over reorganization value " $100,000 " ##### [852-10-55-7](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:2736f9a6b9858bb5eec3a34ceaa73bfc357bb31e161b319bf8b197773e13d389 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The reorganization value of the XYZ Company was determined in consideration of several factors and by reliance on various valuation methods, including discounting cash flow and price/earnings and other applicable ratios. The factors considered by XYZ Company included all of the following: 1. a Forecasted operating and cash flow results that gave effect to the estimated impact of both of the following: 1. 1 Corporate restructuring and other operating program changes 2. 2 Limitations on the use of available net operating loss carryovers and other tax attributes resulting from the plan of reorganization and other events. 2. b The discounted residual value at the end of the forecast period based on the capitalized cash flows for the last year of that period 3. c Market share and position 4. d Competition and general economic considerations 5. e Projected sales growth 6. f Potential profitability 7. g Seasonality and working capital requirements. ##### [852-10-55-8](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:a63039fe5cbaab9c6c266de88069eba904901de988d04296d547f0b831e34776 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After consideration of XYZ Company's debt capacity and other capital structure considerations, such as industry norms, projected earnings to fixed charges, earnings before interest and taxes to interest, free cash flow to interest, and free cash flow to debt service and other applicable ratios, and after extensive negotiations among parties in interest, it was agreed that XYZ's reorganization capital structure should be as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-6C681657-8AF1-48C4-A7AB-78FECC644101-low.gif) Postpetition current liabilities " $300,000 " Internal Revenue Service (IRS) note " 50,000 " Senior debt " 275,000 " (a) Subordinated debt " 175,000 " Common stock " 350,000 " Reorganization capital structure " $1,150,000 " (b) (a) "Due $50,000 per year for each of the next 4 years, at 12% interest, with $75,000 due in the fifth year." (b) See the table in paragraph 852-10-55-10 for the balance sheet adjustments required to reflect XYZ Company's reorganization value as of the date of plan confirmation. ##### [852-10-55-9](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-9) Pending content: yes Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:0a84831a6f11729a290cb88bf4d79c57bce17a6cb71158149b1bccb82fec278c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following entries record the provisions of the plan and the adoption of fresh-start reporting. - ![](https://asc.understandingaccounting.org/asc-img/GUID-EE559453-A486-4AA8-8C5A-D731A8049509-low.gif) Entries to record debt discharge: Liabilities subject to compromise " $1,100,000 " Senior debt—current " $50,000 " Senior debt—long-term " 225,000 " IRS note " 50,000 " Cash " 150,000 " Subordinated debt " 175,000 " Common stock (new) " 86,000 " Additional paid-in capital " 215,000 " Gain on debt discharge " 149,000 " Entries to record exchange of stock for stock: Preferred stock " 325,000 " Common stock (old) " 75,000 " Common stock (new) " 14,000 " Additional paid-in capital " 386,000 " Entries to record the adoption of fresh-start reporting and to eliminate the deficit: Inventory " 50,000 " "Property, plant an equipment" " 175,000 " Reorganization value in excess of amounts allocable to identifiable assets " 175,000 " Gain on debt discharge " 149,000 " Additional paid-in capital " 351,000 " Goodwill " 200,000 " Deficit " 700,000 " Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)The following entries record the provisions of the plan and the adoption of fresh-start reporting. - ![](https://asc.understandingaccounting.org/asc-img/GUID-D765E72D-825D-453E-ADB4-A46E7CEAA518-low.gif) Entries to record debt discharge: Liabilities subject to compromise " $1,100,000 " Senior debt—current " $50,000 " Senior debt—long-term " 225,000 " IRS note " 50,000 " Cash " 150,000 " Subordinated debt " 175,000 " Common stock (new) " 86,000 " Additional paid-in capital " 215,000 " Gain on debt discharge " 149,000 " Entries to record exchange of stock for stock: Preferred stock " 325,000 " Common stock (old) " 75,000 " Common stock (new) " 14,000 " Additional paid-in capital " 386,000 " Entries to record the adoption of fresh-start reporting and to eliminate the deficit: Inventory " 50,000 " "Property, plant, and equipment" " 175,000 " Goodwill (new) " 175,000 " Gain on debt discharge " 149,000 " Additional paid-in capital " 351,000 " Goodwill (old) " 200,000 " Deficit " 700,000 " ##### [852-10-55-10](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-10) Pending content: yes Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:1e835513329fb51a3a6a674b9302c271ad3aaca975c693e680a944fb7a80ad2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of the plan of reorganization on XYZ Company's balance sheet, as of June 30, 19X2, is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-B4554DDA-514C-4791-A606-2BBA9DEA7A73-low.gif) Adjustments to Record Confirmation of Plan XYZ Company's Reorganized Balance Sheet Preconfirmation Debt discharge Exchange of stock Fresh start Assets: Current Assets Cash " $200,000 " " $(150,000)" " $50,000 " Receivables " 250,000 " " 250,000 " Inventory " 175,000 " " $50,000 " " 225,000 " "Assets to be disposed of valued at market, which is lower than cost" " 25,000 " " 25,000 " Other current assets " 25,000 " " 25,000 " " 675,000 " " (150,000)" " 50,000 " " 575,000 " "Property, plant, and equipment" " 175,000 " " 175,000 " " 350,000 " "Assets to be disposed of valued at market, which is lower than cost" " 50,000 " " 50,000 " Goodwill " 200,000 " " (200,000)" Reorganization value in excess of amounts allocable to identifiable assets " 175,000 " " 175,000 " " $1,100,000 " " $(150,000)" " $200,000 " " $1,150,000 " "Liabilities and Shareholders' Deficit:" Liabilities Not Subject to Compromise Current liabilities Short-term borrowings " $25,000 " " $25,000 " Current maturities of senior debt " $50,000 " " 50,000 " Accounts payable trade " 175,000 " " 175,000 " Other liabilities " 100,000 " " 100,000 " " 300,000 " " 50,000 " " 350,000 " Liabilities Subject to Compromise Prepetition liabilities " 1,100,000 " " (1,100,000)" IRS note " 50,000 " " 50,000 " "Senior debt, less current maturities" " 225,000 " " 225,000 " Subordinated debt " 175,000 " " 175,000 " Shareholders' deficit: Preferred stock " 325,000 " " $(325,000)" Additional paid-in capital " 215,000 " " 386,000 " " $(351,000)" " 250,000 " Common stock—old " 75,000 " " (75,000)" Common stock—new " 86,000 " " 14,000 " " 100,000 " Retained earnings (deficit) " (700,000)" " 149,000 " " 700,000 " " (149,000)" " (300,000)" " 450,000 " - " 200,000 " " 350,000 " " $1,100,000 " " $(150,000)" $- " $200,000 " " $1,150,000 " Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)The effect of the plan of reorganization on XYZ Company's balance sheet, as of June 30, 19X2, is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-1B9DB7CE-737A-4223-A2F2-DF80E65F6E54-low.gif) Adjustments to Record Confirmation of Plan XYZ Company's Reorganized Balance Sheet Preconfirmation Debt discharge Exchange of stock Fresh start Assets: Current Assets Cash " $200,000 " " $(150,000)" " $50,000 " Receivables " 250,000 " " 250,000 " Inventory " 175,000 " " $50,000 " " 225,000 " "Assets to be disposed of valued at market, which is lower than cost" " 25,000 " " 25,000 " Other current assets " 25,000 " " 25,000 " " 675,000 " " (150,000)" " 50,000 " " 575,000 " "Property, plant, and equipment" " 175,000 " " 175,000 " " 350,000 " "Assets to be disposed of valued at market, which is lower than cost" " 50,000 " " 50,000 " Goodwill—old " 200,000 " " (200,000)" Goodwill—new " 175,000 " " 175,000 " " $1,100,000 " " $(150,000)" " $200,000 " " $1,150,000 " "Liabilities and Shareholders' Deficit:" Liabilities Not Subject to Compromise Current liabilities Short-term borrowings " $25,000 " " $25,000 " Current maturities of senior debt " $50,000 " " 50,000 " Accounts payable trade " 175,000 " " 175,000 " Other liabilities " 100,000 " " 100,000 " " 300,000 " " 50,000 " " 350,000 " Liabilities Subject to Compromise Prepetition liabilities " 1,100,000 " " (1,100,000)" IRS note " 50,000 " " 50,000 " "Senior debt, less current maturities" " 225,000 " " 225,000 " Subordinated debt " 175,000 " " 175,000 " Shareholders' deficit: Preferred stock " 325,000 " " $(325,000)" Additional paid-in capital " 215,000 " " 386,000 " " $(351,000)" " 250,000 " Common stock—old " 75,000 " " (75,000)" Common stock—new " 86,000 " " 14,000 " " 100,000 " Retained earnings (deficit) " (700,000)" " 149,000 " " 700,000 " " (149,000)" " (300,000)" " 450,000 " - " 200,000 " " 350,000 " " $1,100,000 " " $(150,000)" $- " $200,000 " " $1,150,000 " ##### [852-10-55-11](https://asc.understandingaccounting.org/asc/852/10/#852-10-55-11) Pending content: yes Source downloaded (UTC): 2026-09-10T02:03:19.355Z to 2026-09-10T02:03:19.355Z Record version: sha256:28fd471363fa89757d6f045fcf97f7e59cade8007d13cc626812b6288cd6925d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following illustrative disclosure discusses the details of XYZ Company's [confirmed plan](https://asc.understandingaccounting.org/glossary/c/#confirmed-plan "An official approval by the court of a plan of reorganization under a Chapter 11 proceeding that makes the plan binding on the debtors and creditors. Before a plan is confirmed, it must satisfy 11 requirements in section 1129(a) of the Bankruptcy Code.") of reorganization. In this illustration a tabular presentation entitled Plan of Reorganization Recovery Analysis is incorporated in the note disclosure. The plan of reorganization recovery analysis may alternatively be presented as supplementary information to the financial statements. - Note X - Plan of Reorganization - On June 30, 19X2, the Bankruptcy Court confirmed the Company's plan of reorganization. The Company accounted for the reorganization using fresh-start reporting. Accordingly, all assets and liabilities are adjusted to fair value in accordance with accounting requirements for business combinations under ASC Topic 805. The excess of reorganization value over the fair value of tangible and intangible assets was recorded as "reorganization value in excess of amounts allocable to identifiable assets." The confirmed plan provided for the following: - Secured Debt—The Company's $300,000 of secured debt (secured by a first mortgage lien on a building located in Nashville, Tennessee) was exchanged for $150,000 in cash and a $150,000 secured note, payable in annual installments of $27,300 commencing on June 1, 19X3, through June 1, 19X6, with interest at 12% per annum, with the balance due on June 1, 19X7. - Priority Tax Claims—Payroll and withholding taxes of $50,000 are payable in equal annual installments commencing on July 1, 19X3, through July 1, 19X8, with interest at 11% per annum. - Senior Debt—The holders of approximately $275,000 of senior subordinated secured notes received the following instruments in exchange for their notes: $87,000 in new senior secured debt, payable in annual installments of $15,800 commencing March 1, 19X3, through March 1, 19X6, with interest at 12% per annum, secured by first liens on certain property, plants, and equipment, with the balance due on March 1, 19X7; $123,000 of subordinated debt with interest at 14% per annum due in equal annual installments commencing on October 1, 19X3, through October 1, 19X9, secured by second liens on certain property, plant, and equipment; and 11.4% of the new issue of outstanding voting common stock of the Company. - Trade and Other Miscellaneous Claims—The holders of approximately $225,000 of trade and other miscellaneous claims received the following for their claims: $38,000 in senior secured debt, payable in annual installments of $6,900 commencing March 1, 19X3, through March 1, 19X6, with interest at 12% per annum, secured by first liens on certain property, plants, and equipment, with the balance due on March 1, 19X7; $52,000 of subordinated debt, payable in equal annual installments commencing October 1, 19X3, through October 1, 19X8, with interest at 14% per annum; and 25.7% of the new issue of outstanding voting common stock of the Company. - Subordinated Debentures—The holders of approximately $250,000 of subordinated unsecured debt received, in exchange for the debentures, 48.9% of the new issue outstanding voting common stock of the Company. - Preferred Stock—The holders of 3,250 shares of preferred stock received 12% of the outstanding voting common stock of the new issue of the Company in exchange for their preferred stock. - Common Stock—The holders of approximately 75,000 outstanding shares of the Company's existing common stock received, in exchange for their shares, 2% of the new outstanding voting common stock of the Company. - The following table (Plan of Reorganization Recovery Analysis) summarizes the adjustments required to record the reorganization and the issuance of the various securities in connection with the implementation of the plan. - ![](https://asc.understandingaccounting.org/asc-img/GUID-C886CE2F-00ED-4A43-A61E-06B4682A8758-low.gif) Recovery "Elimination of Debt and Equity" Surviving Debt Senior Debt Subordinated Debt Common Stock (a) Total Recovery Cash IRS Note % Value $ % Postpetition liabilities " $300,000 " " $300,000 " " $300,000 " 100% Claim or Interest Secured debt " 300,000 " " $150,000 " " $150,000 " " 300,000 " 100 Priority tax claim " 50,000 " " $50,000 " " 50,000 " 100 Senior debt " 275,000 " " $(25,000)" " 87,000 " " $123,000 " 11.4% " $40,000 " " 250,000 " 91 Trade and other miscellaneous claims " 225,000 " " (45,000)" " 38,000 " " 52,000 " 25.7 " 90,000 " " 180,000 " 80 Subordinated debentures " 250,000 " " (79,000)" 48.9 " 171,000 " " 171,000 " 68 " 1,100,000 " Preferred stockholders " 325,000 " " (283,000)" 12.0 " 42,000 " " 42,000 " Common stockholders " 75,000 " " (68,000)" 2.0 " 7,000 " " 7,000 " Deficit " (700,000)" " 700,000 " Total " $1,100,000 " " $200,000 " " $300,000 " " $150,000 " " $50,000 " " $275,000 " " $175,000 " 100.0% " $350,000 " " $1,300,000 " (a) "The aggregate par value of the common stock issued under the plan is $100,000." Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)The following illustrative disclosure discusses the details of XYZ Company's [confirmed plan](https://asc.understandingaccounting.org/glossary/c/#confirmed-plan "An official approval by the court of a plan of reorganization under a Chapter 11 proceeding that makes the plan binding on the debtors and creditors. Before a plan is confirmed, it must satisfy 11 requirements in section 1129(a) of the Bankruptcy Code.") of reorganization. In this illustration a tabular presentation entitled Plan of Reorganization Recovery Analysis is incorporated in the note disclosure. The plan of reorganization recovery analysis may alternatively be presented as supplementary information to the financial statements. - Note X - Plan of Reorganization - On June 30, 19X2, the Bankruptcy Court confirmed the Company's plan of reorganization. The Company accounted for the reorganization using fresh-start reporting. Accordingly, all assets and liabilities are adjusted to fair value in accordance with accounting requirements for business combinations under ASC Topic 805. The excess of reorganization value over the fair value of tangible and intangible assets was recorded as “Goodwill (new)." The confirmed plan provided for the following: - Secured Debt—The Company's $300,000 of secured debt (secured by a first mortgage lien on a building located in Nashville, Tennessee) was exchanged for $150,000 in cash and a $150,000 secured note, payable in annual installments of $27,300 commencing on June 1, 19X3, through June 1, 19X6, with interest at 12% per annum, with the balance due on June 1, 19X7. - Priority Tax Claims—Payroll and withholding taxes of $50,000 are payable in equal annual installments commencing on July 1, 19X3, through July 1, 19X8, with interest at 11% per annum. - Senior Debt—The holders of approximately $275,000 of senior subordinated secured notes received the following instruments in exchange for their notes: $87,000 in new senior secured debt, payable in annual installments of $15,800 commencing March 1, 19X3, through March 1, 19X6, with interest at 12% per annum, secured by first liens on certain property, plants, and equipment, with the balance due on March 1, 19X7; $123,000 of subordinated debt with interest at 14% per annum due in equal annual installments commencing on October 1, 19X3, through October 1, 19X9, secured by second liens on certain property, plant, and equipment; and 11.4% of the new issue of outstanding voting common stock of the Company. - Trade and Other Miscellaneous Claims—The holders of approximately $225,000 of trade and other miscellaneous claims received the following for their claims: $38,000 in senior secured debt, payable in annual installments of $6,900 commencing March 1, 19X3, through March 1, 19X6, with interest at 12% per annum, secured by first liens on certain property, plants, and equipment, with the balance due on March 1, 19X7; $52,000 of subordinated debt, payable in equal annual installments commencing October 1, 19X3, through October 1, 19X8, with interest at 14% per annum; and 25.7% of the new issue of outstanding voting common stock of the Company. - Subordinated Debentures—The holders of approximately $250,000 of subordinated unsecured debt received, in exchange for the debentures, 48.9% of the new issue outstanding voting common stock of the Company. - Preferred Stock—The holders of 3,250 shares of preferred stock received 12% of the outstanding voting common stock of the new issue of the Company in exchange for their preferred stock. - Common Stock—The holders of approximately 75,000 outstanding shares of the Company's existing common stock received, in exchange for their shares, 2% of the new outstanding voting common stock of the Company. - The following table (Plan of Reorganization Recovery Analysis) summarizes the adjustments required to record the reorganization and the issuance of the various securities in connection with the implementation of the plan. - ![](https://asc.understandingaccounting.org/asc-img/GUID-C886CE2F-00ED-4A43-A61E-06B4682A8758-low.gif) Recovery "Elimination of Debt and Equity" Surviving Debt Senior Debt Subordinated Debt Common Stock (a) Total Recovery Cash IRS Note % Value $ % Postpetition liabilities " $300,000 " " $300,000 " " $300,000 " 100% Claim or Interest Secured debt " 300,000 " " $150,000 " " $150,000 " " 300,000 " 100 Priority tax claim " 50,000 " " $50,000 " " 50,000 " 100 Senior debt " 275,000 " " $(25,000)" " 87,000 " " $123,000 " 11.4% " $40,000 " " 250,000 " 91 Trade and other miscellaneous claims " 225,000 " " (45,000)" " 38,000 " " 52,000 " 25.7 " 90,000 " " 180,000 " 80 Subordinated debentures " 250,000 " " (79,000)" 48.9 " 171,000 " " 171,000 " 68 " 1,100,000 " Preferred stockholders " 325,000 " " (283,000)" 12.0 " 42,000 " " 42,000 " Common stockholders " 75,000 " " (68,000)" 2.0 " 7,000 " " 7,000 " Deficit " (700,000)" " 700,000 " Total " $1,100,000 " " $200,000 " " $300,000 " " $150,000 " " $50,000 " " $275,000 " " $175,000 " 100.0% " $350,000 " " $1,300,000 " (a) "The aggregate par value of the common stock issued under the plan is $100,000." Source downloaded (UTC): 2026-09-10T02:03:22.162Z to 2026-09-10T02:03:22.162Z Record version: sha256:d2f46483446436e0dbb89c18b9f6dcd90a609a104c0776f15be12245fe63a946 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/852/10/#60-relationships) SEC content: no #### Financial Services—Depository and Lending ##### [852-10-60-1](https://asc.understandingaccounting.org/asc/852/10/#852-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:22.162Z to 2026-09-10T02:03:22.162Z Record version: sha256:803aa792734ae46aea8aa8fb646b5bfda3c5da3353862d514a58e1a738b1046d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the required financial statement reporting of a [liquidating bank](https://asc.understandingaccounting.org/glossary/l/#liquidating-bank "A bank with a substantial amount of nonperforming assets may transfer some or all of those assets to a newly created bank whose stock will be distributed to existing shareholders or to new investors. The newly created bank will be a liquidating bank; that is, it will manage the assets it receives and collect cash from loan repayments or dispositions of assets. All cash remaining after paying expenses and debt service, if any, will be distributed to the shareholders of the liquidating bank. The liquidating bank will likely be in the process of liquidation for several years."), see Subtopic 205-30. Source downloaded (UTC): 2026-09-10T02:03:26.455Z to 2026-09-10T02:03:59.595Z Record version: sha256:9190cfa082ba40fe3acfbc3d2a5adcbf0c75552939fbf87687838990a7440efa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20: Reorganizations — Quasi-Reorganizations ### Machine-generated study aids ```json { "summary": "ASC 852-20 governs quasi-reorganizations (\"readjustments\"), a corporate readjustment procedure in which a corporation—without forming a new entity or entering court proceedings—restates its balance sheet to fair value, eliminates an accumulated deficit, and relieves current or future income of charges by charging them to additional paid-in capital. This is an express exception to the general rule in 852-20-25-2 that additional paid-in capital may not be used to relieve the income account. The Subtopic prescribes the conditions for the readjustment (full disclosure to and formal consent of shareholders, fair asset carrying amounts), the ordering of write-offs (retained earnings first, then APIC), and the post-readjustment dating of a new retained earnings account.", "key_points": [ "General rule: additional paid-in capital, however created, shall not be used to relieve the income account of current or future years of charges that would otherwise be made to it; a readjustment is the permitted exception when the facts are fully revealed to and formally approved by the shareholders (852-20-25-2).", "The entity must make a clear report to shareholders of the proposed restatements, obtain their formal consent, and present a fair balance sheet at the readjustment date in which the adjustment of carrying amounts is reasonably complete (852-20-25-3).", "Amounts written off are charged first against retained earnings to their full extent, with any balance then charged to additional paid-in capital; for consolidated entities, no consolidated retained earnings may survive a readjustment in which any losses were charged to APIC (852-20-25-4).", "The effective date should be as near as practicable to the date of formal shareholder consent and ordinarily not before the close of the last completed fiscal year; afterward the accounting is substantially similar to that of a new entity, and APIC arising in the readjustment is restricted as that of a new corporation (852-20-25-5; 852-20-25-6).", "Assets are carried forward at fair, not unduly conservative, amounts; if fair value is not readily determinable a conservative estimate may be made and described as an estimate, and provision may be made for maximum probable losses or charges known to have arisen before the readjustment date but then indeterminate (852-20-30-2 through 30-4).", "Subsequent material differences in those estimates or provisions not attributable to later events shall not be carried to income or retained earnings, nor used to offset post-readjustment gains or losses, but shall be recorded as additional paid-in capital (852-20-35-2).", "A new retained earnings account must be established and dated from the effective date of the readjustment, with the dating disclosed until the date loses special significance—rarely, if ever, significant after 10 years (852-20-50-2)." ], "categories": [ "Debt and equity", "Subsequent measurement", "Disclosure", "Financial statement presentation" ], "audience_level": "advanced", "student_note": "Quasi-reorganizations are a rare but heavily tested exception: they let a corporation wipe out an accumulated deficit against APIC without bankruptcy, but only with full shareholder disclosure and consent. The classic misunderstanding is thinking assets should be written down aggressively—the guidance requires fair, not unduly conservative, amounts, and any later correction of an over- or under-estimate goes to APIC, never to income or retained earnings.", "related_topics": [ "852-740", "852-10", "505-10", "740-10", "820-10" ], "key_concepts": [ "quasi-reorganization", "readjustment", "accumulated deficit elimination", "additional paid-in capital", "fresh-start-like restatement to fair value", "dating of retained earnings", "shareholder consent", "asset carrying amounts" ] } ``` Source downloaded (UTC): 2026-09-10T02:03:26.455Z to 2026-09-10T02:03:26.455Z Record version: sha256:536245e11c009ab9879344f7fbcc6bee8a9729dc080041b6dd20de50c70f4990 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/852/20/#05-overview-and-background) SEC content: no ##### [852-20-05-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:26.455Z to 2026-09-10T02:03:26.455Z Record version: sha256:b5f0c66945c529ef543743e96baf48d03373cdf01ed288de1228e44cdf852cb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting applicable to a corporate readjustment procedure in which, without the creation of a new corporate entity and without the intervention of formal court proceedings, an entity restates its balance sheet to fair value. This corporate readjustment procedure may eliminate an accumulated deficit and/or prevent future charges to its income statement that otherwise would be made. The accounting permitted through such a procedure is an exception to the general rule discussed in paragraph [852-20-25-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-2). ##### [852-20-05-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:26.455Z to 2026-09-10T02:03:26.455Z Record version: sha256:e31b30252c61202353a20c7aac398ef8bb4cbd53ce914a6583979e180259acc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Readjustments of this kind fall in the category of what are called quasi-reorganizations. This Subtopic does not deal with the general question of quasi-reorganizations, but only with cases in which the exception permitted in paragraph [852-20-25-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-2) is availed of by a corporation. Such cases are referred to as readjustments. The accounting and reporting issues that arise and are addressed in this Subtopic consist of what is permitted in a readjustment and what is permitted thereafter. ##### [852-20-05-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:26.455Z to 2026-09-10T02:03:26.455Z Record version: sha256:38a4466bdf7f6d8be3e88725fe5a4ea8744d1454649259d3e4106ec90b4da695 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not address quasi-reorganizations involving only deficit reclassifications. Source downloaded (UTC): 2026-09-10T02:03:29.660Z to 2026-09-10T02:03:29.660Z Record version: sha256:3346cb6ad4135c80c4bd77abae4704a364eb43f0321544aeca7cd177a32274ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/852/20/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [852-20-15-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:29.660Z to 2026-09-10T02:03:29.660Z Record version: sha256:984034d31212ae0c865c33b2b8bac5670d7ae1a7218f681d459e56c722685e9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all public and nonpublic entities that are corporations. #### Transactions ##### [852-20-15-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:29.660Z to 2026-09-10T02:03:29.660Z Record version: sha256:32fbf3a907d58dbae07500fa232a96ce5f79d6eb1714dea588211c8d2cac8261 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies only to readjustments in which the current income, or retained earnings or accumulated deficit account, or the income account of future years is relieved of charges that would otherwise be made against it, and is therefore limited to readjustments of the type specified in paragraph [852-20-25-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-2). ##### [852-20-15-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:29.660Z to 2026-09-10T02:03:29.660Z Record version: sha256:1521c11bbb45688e009ef1f1424971bd6b07a2534b2a36c6b85f35ff92542268 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Quasi-reorganizations involving only deficit reclassifications 2. b Charges against additional paid-in capital in other types of readjustments such as readjustments for the purpose of correcting erroneous credits made to additional paid-in capital in the past 3. c Financial reporting for entities that enter and intend to emerge from [Chapter 11](https://asc.understandingaccounting.org/glossary/c/#chapter-11 "A reorganization action, either voluntarily or involuntarily initiated under the provisions of the Bankruptcy Code, that provides for a reorganization of the debt and equity structure of the business and allows the business to continue operations. A debtor may also file a plan of liquidation under Chapter 11.") reorganization, at the time of such reorganization. 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. Source downloaded (UTC): 2026-09-10T02:03:39.791Z to 2026-09-10T02:03:39.791Z Record version: sha256:e503954611a8431df461ada9cfaea297bf5f392cef18356c34e7ffcffe1b9389 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/852/20/#30-initial-measurement) SEC content: no ##### [852-20-30-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:39.791Z to 2026-09-10T02:03:39.791Z Record version: sha256:ee275d74c2869e1c042a72f5f0bc15c9a4273bd5a62512cf746894cfc82a1a6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance on the adjustment of accounts required by paragraph [852-20-25-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-3) as of the readjustment date in connection with the readjustments addressed by this Subtopic. ##### [852-20-30-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:39.791Z to 2026-09-10T02:03:39.791Z Record version: sha256:a61349c101d1bcd9de729a33e1deff0fb627ea1f1e02ab60e618625857a13a24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A write-down of assets below amounts that are likely to be subsequently realized, though it may result in conservatism in the balance sheet at the readjustment date, may also result in overstatement of earnings or of retained earnings when the assets are subsequently realized. Therefore, in general, assets shall be carried forward as of the date of readjustment at fair and not unduly conservative amounts, determined with due regard for the accounting to be subsequently employed by the entity. ##### [852-20-30-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:39.791Z to 2026-09-10T02:03:39.791Z Record version: sha256:2a249c18d2f220178b63ae7811ca33604ba5175ecc97f7dca862926755e1175a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the fair value of any asset is not readily determinable a conservative estimate may be made, but in that case the amount shall be described as an estimate. Paragraph [852-20-35-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-35-2) describes the subsequent accounting for any material difference arising through realization or otherwise and not attributable to events occurring or circumstances arising after that date. ##### [852-20-30-4](https://asc.understandingaccounting.org/asc/852/20/#852-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:39.791Z to 2026-09-10T02:03:39.791Z Record version: sha256:b60027953b643d5508fdb5e0b87d8699ed9e35890602505edf66de608c401278 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Similarly, if potential losses or charges are known to have arisen before the date of readjustment but such amounts are then indeterminate, provision may properly be made to cover the maximum probable losses or charges. Source downloaded (UTC): 2026-09-10T02:03:43.142Z to 2026-09-10T02:03:43.142Z Record version: sha256:edc81a22547bb23fce8a8024b70187344b9b0850b89ab6706334d1d13ed860b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/852/20/#35-subsequent-measurement) SEC content: no ##### [852-20-35-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:43.142Z to 2026-09-10T02:03:43.142Z Record version: sha256:7ee7d0c7a1b9e8eb8f3c8e40a0e18cb5f0baabfb8f4dddc9a2956041da1eba5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 852-20-30 addresses the adjustments required to be made at the date of a readjustment addressed by this Subtopic. This Section addresses the subsequent accounting if the amounts determined as of the date of readjustment are found to have been excessive or insufficient. ##### [852-20-35-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:43.142Z to 2026-09-10T02:03:43.142Z Record version: sha256:6bc199627da14d6e86ec3bae965976697efdc29a1143198090ededec104defb8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the fair value of any asset was not readily determinable and a conservative estimate was made at the date of the readjustment, any material difference arising through realization or otherwise and not attributable to events occurring or circumstances arising after that date shall not be carried to income or retained earnings. Similarly, if provisions for losses or charges established at the date of readjustment are subsequently found to have been excessive or insufficient, the difference shall not be carried to retained earnings nor used to offset losses or gains originating after the readjustment, but shall be recorded as additional paid-in capital. Source downloaded (UTC): 2026-09-10T02:03:45.583Z to 2026-09-10T02:03:45.583Z Record version: sha256:09ad56bbe62a5328daeac184998217f1944b171bccbb95c8d7f10384a382e567 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/852/20/#50-disclosure) SEC content: no ##### [852-20-50-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:45.583Z to 2026-09-10T02:03:45.583Z Record version: sha256:998749251e83de5f3b306a5a3a542aa0c2df8e96f96015da12f6b4e5d465216f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section addresses an entity's disclosure requirements for periods following a readjustment within the scope of this Subtopic. ##### [852-20-50-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:45.583Z to 2026-09-10T02:03:45.583Z Record version: sha256:fd4ad73666fa5eb5a5167f5f4e4bd82a70ba8929b83121f2a8f39e423f598675 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After such a readjustment, retained earnings previously accumulated cannot properly be carried forward under that title. A new retained earnings account shall be established, dated to show that it runs from the effective date of the readjustment, and this dating shall be disclosed in financial statements until such time as the effective date is no longer deemed to possess any special significance. The dating of retained earnings following a quasi-reorganization would rarely, if ever, be of significance after a period of 10 years. There may be exceptional circumstances in which the discontinuance of the dating of retained earnings could be justified at the conclusion of a period less than 10 years. Source downloaded (UTC): 2026-09-10T02:03:51.877Z to 2026-09-10T02:03:51.877Z Record version: sha256:dab101fc64c0268efed8ba7751ec764dd653af46aa7e39939558150ef6da8390 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/852/20/#sec-00-status) SEC content: yes ##### [852-20-S00-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:51.877Z to 2026-09-10T02:03:51.877Z Record version: sha256:856e3aa3597f0d5e5f24ca376eb73b00c095c72f24746d2f5dc916418f93060e 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
852-20-S99-2AmendedAccounting Standards Update No. 2012-0308/27/2012
Source downloaded (UTC): 2026-09-10T02:03:53.801Z to 2026-09-10T02:03:53.801Z Record version: sha256:5a275acb903850039e3a35b33cd463a45b1263c0880e544026a77a5228512f48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/852/20/#sec-25-recognition) SEC content: yes #### Quasi-Reorganization ##### [852-20-S25-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-S25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:53.801Z to 2026-09-10T02:03:53.801Z Record version: sha256:80b8fbee3141ac156c8128f6f4acc54ba9ea661a64e36a0cbcb692631e20ceb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-1), CFRR 210, for conditions necessary to effect a quasi-reorganization. Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:795113ad37028fb12008178d3874416d149a8ec68cbd01cd79db02106b98eb5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-S55: SEC 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/852/20/#sec-55-implementation-guidance-and-illustrations) SEC content: yes #### Quasi-Reorganization ##### [852-20-S55-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-S55-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:b0bde430bd6f5bd5567d31615bddee75bff199e254dd19037b108dfa1bd58ff1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2), SAB Topic 5.S, Question 1, for SEC Staff views on reclassifying accumulated deficit without satisfying the conditions in CFRR 210 for reorganization. #### Implementing a Change in Accounting Principle in Conjunction with a Quasi-Reorganization ##### [852-20-S55-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S55-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:9b81edb5ef6c99d8c06f33b540623eafbdfd08438d5c29790baceed24871532d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2), SAB Topic 5.S, Question 2, for SEC Staff views on implementing an accounting change in conjunction with a quasi-reorganization. #### Write-Up of Net Assets in Conjunction with a Quasi-Reorganization ##### [852-20-S55-3](https://asc.understandingaccounting.org/asc/852/20/#852-20-S55-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:b5bce5ee4841946b2bea9eb7e0353e7e0767ff03d0abd1f0c24cdfac8f0144f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2), SAB Topic 5.S, Question 3, for SEC Staff views on writing up assets in conjunction with a quasi-reorganization. #### Accounting for the Subsequent Recognition of Tax Benefits that Existed at the Date of a Quasi-Reorganization ##### [852-20-S55-4](https://asc.understandingaccounting.org/asc/852/20/#852-20-S55-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:7807a0f9e5c4ec8a711cb27f6c46fb2a8b52e7e2a0d0ec51f02aa9187c50ebf9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2), SAB Topic 5.S, Question 4, for SEC Staff views on accounting for the subsequent recognition of tax benefits that existed at the date of a quasi-reorganization. #### "Undoing" a Quasi-Reorganization ##### [852-20-S55-5](https://asc.understandingaccounting.org/asc/852/20/#852-20-S55-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:55.642Z to 2026-09-10T02:03:55.642Z Record version: sha256:dff484374f2e108a960e1b6049a76456d39c82f12b9343366a500e28a438279b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2), SAB Topic 5.S, Question 5, for SEC Staff views on undoing a previous quasi-reorganization. Source downloaded (UTC): 2026-09-10T02:03:59.595Z to 2026-09-10T02:03:59.595Z Record version: sha256:786d254420f9fcb14eec8a100fbab2c00aa17bd9d6179702019fd7ab694c8cf6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 852-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/852/20/#sec-99-sec-materials) SEC content: yes #### SEC Rules, Regulations, and Interpretations ##### [852-20-S99-1](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:59.595Z to 2026-09-10T02:03:59.595Z Record version: sha256:9afd20b6275da430c1f41703c95c0d98363077e2ce8f39d9f6297af6d6814add Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of FRR 210. Quasi-reorganization. - ASR 25: (5/29/41) - Inquiry has been made from time to time as to the conditions under which a quasi-reorganization has come to be applied in accounting to the corporate procedures in the course of which a company, without the creation of a new corporate entity and without the intervention of formal court proceedings, is enabled to eliminate a deficit whether resulting from operations of the recognition of other losses or both and to establish a new earned surplus account for the accumulation of earnings subsequent to the date selected as the effective date of the quasi-reorganization. - It has been the Commission's view for some time that a quasi-reorganization may not be considered to have been effected unless at least all the following conditions exist: - (1) Earned surplus, as of the date selected, is exhausted; - (2) Upon consummation of the quasi-reorganization, no deficit exists in any surplus account; - (3) The entire procedure is made known to all persons entitled to vote on matters of general corporate policy and the appropriate consents to the particular transactions are obtained in advance in accordance with the applicable law and charter provisions; - (4) The procedure accomplishes, with respect to the accounts, substantially what might be accomplished in a reorganization by legal proceedings—namely, the restatement of assets in terms of present conditions as well as appropriate modifications of capital and capital surplus, in order to obviate so far as possible necessity of future reorganizations of like nature. - It is implicit in such a procedure that reductions in the carrying value of assets at the effective date may not be made beyond a point which gives appropriate recognition to conditions which appear to have resulted in relatively permanent reductions in asset values; as for example, complete or partial obsolescence, lessened utility value, reduction in investment value due to changed economic conditions, or, in the case of current assets, declines in indicated realization value. It is also implicit in a procedure of this kind that it is not to be employed recurrently but only under circumstances which would justify an actual reorganization of formation of a new corporation, particularly if the sole or principle purpose of the quasi-reorganization is the elimination of a deficit in earned surplus resulting from operating losses. - In the case of the quasi-reorganization of a parent company, it is an implicit result of such procedure that the effective date should be recognized as having the significance of a date of acquisition of control of subsidiaries. Likewise, in consolidated statements, earned surplus of subsidiaries at the effective date should be excluded from earned surplus on the consolidated balance sheet. #### SEC Staff Guidance ##### [852-20-S99-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-S99-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:03:59.595Z to 2026-09-10T02:03:59.595Z Record version: sha256:97ef928591e484e53768749b9617685c63d623fb955901e52a97de0e8500d4be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.S, Quasi-Reorganization. - Facts: As a consequence of significant operating losses and/or recent write-downs of property, plant and equipment, a company's financial statements reflect an accumulated deficit. The company desires to eliminate the deficit by reclassifying amounts from paid-in-capital. In addition, the company anticipates adopting a discretionary change in accounting principles FN21 that will be recorded as a cumulative-effect type of accounting change. The recording of the cumulative effect will have the result of increasing the company's retained earnings. - FN21 Discretionary accounting changes require the filing of a preferability letter by the registrant's independent accountant pursuant to Item 601 of Regulation S-K and Rule 10-01(b)(6) of Regulation S-X, respectively. - Question 1: May the company reclassify its capital accounts to eliminate the accumulated deficit without satisfying all of the conditions enumerated in Section 210 FN22 of the Codification of Financial Reporting Policies for a quasi-reorganization? - FN22 ASR 25. - Interpretive Response: No. The staff believes a deficit reclassification of any nature is considered to be a quasi-reorganization. As such, a company may not reclassify or eliminate a deficit in retained earnings unless all requisite conditions set forth in Section 210 FN23 for a quasi-reorganization are satisfied. FN24 - FN23 Section 210 (ASR 25) indicates the following conditions under which a quasi-reorganization can be effected without the creation of a new corporate entity and without the intervention of formal court proceedings: 1. Earned surplus, as of the date selected, is exhausted; 2. Upon consummation of the quasi-reorganization, no deficit exists in any surplus account; 3. The entire procedure is made known to all persons entitled to vote on matters of general corporate policy and the appropriate consents to the particular transactions are obtained in advance in accordance with the applicable laws and charter provisions; 4. The procedure accomplishes, with respect to the accounts, substantially what might be accomplished in a reorganization by legal proceedings - namely, the restatement of assets in terms of present considerations as well as appropriate modifications of capital and capital surplus, in order to obviate, so far as possible, the necessity of future reorganization of like nature. - FN24 In addition, FASB ASC Subtopic 852-20, Reorganizations—Quasi-Reorganizations, outlines procedures that must be followed in connection with and after a quasi-reorganization. - Question 2: Must the company implement the discretionary change in accounting principle simultaneously with the quasi-reorganization or may it adopt the change after the quasi-reorganization has been effected? - Interpretive Response: The staff has taken the position that the company should adopt the anticipated accounting change prior to or as an integral part of the quasi-reorganization. Any such accounting change should be effected by following GAAP with respect to the change. FN25 - FN25 FASB ASC Topic 250 provides accounting principles to be followed when adopting accounting changes. In addition, many newly-issued accounting pronouncements provide specific guidance to be followed when adopting the accounting specified in such pronouncements. - FASB ASC paragraph [852-20-25-5](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-5) (Reorganizations Topic) indicates that, following a quasi-reorganization, an "entity's accounting shall be substantially similar to that appropriate for a new entity." The staff believes that implicit in this "fresh-start" concept is the need for the company's accounting principles in place at the time of the quasi-reorganization to be those planned to be used following the reorganization to avoid a misstatement of earnings and retained earnings after the reorganization. FN26 FASB ASC paragraph [852-20-30-2](https://asc.understandingaccounting.org/asc/852/20/#852-20-30-2) states, in part, "... in general, assets should be carried forward as of the date of the readjustment at fair and not unduly conservative amounts, _determined with due regard for the accounting to be subsequently employed by the entity_." (emphasis added) - FN26 Certain newly-issued accounting standards do not require adoption until some future date. The staff believes, however, that if the registrant intends or is required to adopt those standards within 12 months following the quasi-reorganization, the registrant should adopt those standards prior to or as an integral part of the quasi-reorganization. Further, registrants should consider early adoption of standards with effective dates more than 12 months subsequent to a quasi-reorganization. - In addition, the staff believes that adopting a discretionary change in accounting principle that will be reflected in the financial statements within 12 months following the consummation of a quasi-reorganization leads to a presumption that the accounting change was contemplated at the time of the quasi-reorganization. FN27 - FN27 Certain accounting changes require restatement of prior financial statements. The staff believes that if a quasi-reorganization had been recorded in a restated period, the effects of the accounting change on quasi-reorganization adjustments should also be restated to properly reflect the quasi-reorganization in the restated financial statements. - Question 3: In connection with a quasi-reorganization, may there be a write-up of net assets? - Interpretive Response: No. The staff believes that increases in the recorded values of specific assets (or reductions in liabilities) to fair value are appropriate providing such adjustments are factually supportable, however, the amount of such increases are limited to offsetting adjustments to reflect decreases in other assets (or increases in liabilities) to reflect their new fair value. In other words, a quasi-reorganization should not result in a write-up of net assets of the registrant. - Question 4: The interpretive response to question 1 indicates that the staff believes that a deficit reclassification of any nature is considered to be a quasi-reorganization, and accordingly, must satisfy all the conditions of Section 210. FN28 Assume a company has satisfied all the requisite conditions of Section 210, and has eliminated a deficit in retained earnings by a concurrent reduction in paid-in capital, but did not need to restate assets and liabilities by a charge to capital because assets and liabilities were already stated at fair values. How should the company reflect the tax benefits of operating loss or tax credit carryforwards for financial reporting purposes that existed as of the date of the quasi-reorganization when such tax benefits are subsequently recognized for financial reporting purposes? - FN28 See footnote 23. - Interpretive Response: The staff believes FASB ASC Subtopic 852-740, Reorganizations—Income Taxes, requires that any subsequently recognized tax benefits of operating loss or tax credit carryforwards that existed as of the date of a quasi-reorganization be reported as a direct addition to paid-in capital. The staff believes that this position is consistent with the "new company" or "fresh-start" concept embodied in Section 210, FN29 and in existing accounting literature regarding quasi-reorganizations, and with the FASB staff's justification for such a position when they stated that a "new enterprise would not have tax benefits attributable to operating losses or tax credits that arose prior to its organization date. FN30 - FN29 Section 210 (ASR 25) discusses the "conditions under which a quasi-reorganization has come to be applied in accounting to the corporate procedures in the course of which a company, without creation of new corporate entity and without intervention of formal court proceedings, is enabled to eliminate a deficit whether resulting from operations or recognition of other losses or both and to establish a new earned surplus account for the accumulation of earnings subsequent to the date selected as the effective date of the quasi-reorganization." It further indicates that "it is implicit in a procedure of this kind that it is not to be employed recurrently, _but only under circumstances which would justify an actual reorganization or formation of a new corporation_, particularly if the sole purpose of the quasi-reorganization is the elimination of a deficit in earned surplus resulting from operating losses." (emphasis added) - FN30 FASB ASC paragraph [852-740-55-4](https://asc.understandingaccounting.org/asc/740/852/#740-852-55-4) states in part: "As indicated in paragraph [852-20-25-5](https://asc.understandingaccounting.org/asc/852/20/#852-20-25-5), after a quasi-reorganization, the entity's accounting shall be substantially similar to that appropriate for a new entity. As such, any subsequently recognized tax benefit of an operating loss or tax credit carryforward that existed at the date of a quasi-reorganization shall not be included in the determination of income of the "new" entity, regardless of whether losses that gave rise to an operating loss carryforward were charged to income prior to the quasi-reorganization or directly to contributed capital as part of the quasi-reorganization. A new entity would not have tax benefits attributable to operating losses or tax credits that arose prior to its organization date." - The staff believes that all registrants that comply with the requirements of Section 210 in effecting a quasi-reorganization should apply the accounting required by FASB ASC paragraph [852-740-45-3](https://asc.understandingaccounting.org/asc/740/852/#740-852-45-3) for the tax benefits of tax carryforward items. FN31 FN32 Therefore, even though the only effect of a quasi-reorganization is the elimination of a deficit in retained earnings because assets and liabilities are already stated at fair values and the revaluation of assets and liabilities is unnecessary (or a write-up of net assets is prohibited as indicated in the interpretive response to question 3 above), subsequently recognized tax benefits of operating loss or tax credit carryforward items should be recorded as a direct addition to paid-in capital. - FN31 \[Original footnote removed by SAB 114.\] - FN32 FASB ASC paragraph [852-740-45-3](https://asc.understandingaccounting.org/asc/740/852/#740-852-45-3) states: "\[t\]he tax benefit of deductible temporary differences and carryforwards as of the date of a quasi reorganization as defined and contemplated in FASB ASC Subtopic 852-20, ordinarily are reported as a direct addition to contributed capital if the tax benefits are recognized in subsequent years." - Question 5: If a company had previously recorded a quasi-reorganization that only resulted in the elimination of a deficit in retained earnings, may the company reverse such entry and "undo" its quasi-reorganization? - Interpretive Response: No. The staff believes FASB ASC 250, Accounting Changes and Error Corrections, would preclude such a change in accounting. It states: "a method of accounting that was previously adopted for a type of transaction or event that is being terminated _or that was a single, nonrecurring event in the past shall not be changed_." (emphasis added.) FN33 - FN33 FASB ASC paragraph [250-10-45-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-12).