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Proposed guidance for entities in bankruptcy.

PROPOSED GUIDANCE FOR ENTITIES IN BANKRUPTCY

New guidance has been proposed for financial reporting by entities that have filed petitions with the Bankruptcy Court and that anticipate reorganization as going-concern operations.

An exposure draft of a proposed American Institute of CPAs statement of position, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, was developed to promote uniform, realistic financial reporting for entities both during reorganization under chapter 11 of the Bankruptcy Code and on their emergence from reorganization as a going concern. No specific guidance on these topics is currently available in the financial reporting literature.

The SOP recommends that all entities report in the same way while reorganizing under chapter 11 and that their financial statements distinguish transactions and events directly associated with the reorganization from the ongoing operations of the business as it evolves.

The SOP also recommends that, on emerging from chapter 11, entities meeting a specified set of criteria adopt fresh start reporting. This is because, in substance, the creditors have acquired the entities. (Commentators are asked to state their preference concerning the reporting for net operating losses realized after fresh start reporting begins.)

Written comments on the ED should be received by Albert Goll, technical manager of the AICPA accounting standards division, by July 2, 1990.
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Publication:Journal of Accountancy
Date:Jun 1, 1990
Words:213
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