A reporting entity’s financial statements while reporting under ASC 852-10 are in most ways presented similar to those for the period prior to the filing of the petition. The reporting entity will continue to present a balance sheet and statements of operations, cash flows, and changes in stockholders' equity, as well as notes to the financial statements, after filing the petition. An important distinguishing feature, however, is the labeling of the financial statements. A debtor-in-possession title should clearly label each financial statement. See BLG 7.2 for examples of common disclosures by a reporting entity during periods of financial distress leading up to and while in bankruptcy. Also, BLG 7.3 includes examples of additional disclosures required in the period between the filing of the petition and the reporting entity’s emergence from bankruptcy.
Critical points in the accounting and financial reporting for a reporting entity in bankruptcy are found within ASC 852-10-45-1 and ASC 852-10-45-2, which state:

ASC 852-10-45-1

Entering a reorganization proceeding, 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.

ASC 852-10-45-2

For the purpose of presenting an entity's financial evolution during a Chapter 11 reorganization (see paragraph 852-10-10-1), the financial statements for periods including and after filing the Chapter 11 petition shall distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

The guidance in ASC 852-10-45-1 provides the general concept that financial reporting during a bankruptcy proceeding does not necessarily affect the accounting for most items on the balance sheet and in the income statement. In most cases, other GAAP would continue to apply in the recognition and measurement of assets and liabilities as if a reporting entity was not involved in a bankruptcy proceeding. For example, the literature applicable to the various accounting matters discussed in BLG 2, such as asset impairments, other asset valuation matters, and income tax considerations, would generally still apply after a bankruptcy filing. However, because a reporting entity in bankruptcy is clearly in circumstances different from those in periods before the filing of the petition, some changes in the financial statements are needed to reflect the unique aspects of the bankruptcy proceeding.
The most significant impact of ASC 852-10 on the reporting of balance sheet items involves the classification and presentation of liabilities of a reporting entity in reorganization. These are discussed in BLG 3.3.
Question BLG 3-1
How should the filing of a voluntary petition for bankruptcy protection under Chapter 11 of the Bankruptcy Code on January 30 impact Company A’s calendar year-end financial statements which have not been issued?
PwC response
The application of the accounting requirements of ASC 852-10 begins upon the filing of the bankruptcy petition for reorganization. As such, Company A would not report the calendar year-end financial statements under ASC 852-10. In addition, the financial statements should not be labeled as “debtor-in-possession” as to do so would suggest that the bankruptcy accounting guidance had been adopted for the financial statements presented. Even though substantial bankruptcy-related costs are usually incurred prior to filing for bankruptcy, "Reorganization items, net" would typically not be reflected as a caption in the income statement for the fiscal period(s) included in the financial statements prior to the petition date.
The filing for bankruptcy and its impact on the financial statements would usually be disclosed as a subsequent event in the year-end financial statements.
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