Wiley GAAP 2019

60ASC 852 REORGANIZATIONS

PERSPECTIVE AND ISSUES

Subtopics

ASC 852, Reorganizations, contains two subtopics:

• ASC 852-10, Overall, which provides guidance for entities that have filed petitions in the Bankruptcy Court and expect to reorganize under Chapter 11
• ASC 852-20, Quasi-Reorganizations

Scope and Scope Exceptions

ASC 852-10 applies to all entities except governmental organizations but does not apply to debt restructurings outside of Chapter 11 and reorganizations consisting of liquidation or adoption of plans of liquidation under the Bankruptcy Code.

ASC 852-20 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. . . .” Further, it does not apply to:

1. “Quasi-reorganizations involving only deficit reclassifications
2. 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. Financial reporting for entities that enter and intend to emerge from Chapter 11 reorganization, at the time of such reorganization.”

   (ASC 852-20-15-3)

Overview

Entities expected to reorganize as going concerns under Chapter 11 of the Bankruptcy Code employ so-called “fresh start” accounting if:

1. The “reorganization value of the assets of the emerging entity immediately before the date of confirmation ...