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Excerpt from ASC 852-10-45-20
Predecessor |
Reorganization adjustments |
Fresh-start adjustments |
Successor |
|||||
Cash |
$ |
100 |
$ |
425 1 |
$ |
– |
$ |
525 |
Accounts receivable |
400 |
– |
– |
400 |
||||
Property, plant, & equipment |
2,000 |
– |
600 5 |
2,600 |
||||
Goodwill |
100 |
– |
100 5 |
200 |
||||
Intangible assets |
– |
– |
275 5 |
200 |
||||
Total assets |
$ |
2,600 |
$ |
425 |
$ |
975 |
$ |
4,000 |
Accounts payable |
400 |
– |
– |
400 |
||||
Accrued liabilities |
200 |
– |
– |
200 |
||||
Long-term debt |
– |
475 2 |
15 5 |
490 |
||||
Liabilities subject to compromise |
4,000 |
(4,000) 4 |
– |
– |
||||
Total liabilities |
$ |
4,600 |
$ |
(3,525) |
$ |
15 |
$ |
1,090 |
Predecessor common stock |
10 |
(10) 3 |
– |
|||||
Predecessor additional paid-in capital |
690 |
(690) 3 |
– |
|||||
Successor common stock |
– |
100 4 |
– |
100 |
||||
Successor additional paid-in capital |
– |
2,810 4 |
– |
2,810 |
||||
Retained earnings (accumulated deficit) |
(2,700) |
1,740 4 |
960 6 |
– |
||||
Total stockholders' equity (deficit) |
$ |
(2,000) |
$ |
3,950 |
$ |
960 |
$ |
2,910 |
Total liabilities and stockholders' equity |
$ |
2,600 |
$ |
425 |
$ |
975 |
$ |
4,000 |
(1) Reorganization adjustments reflect the sources and uses of cash on the effective date: |
||||||||
Sources Proceeds from issuance of new term notes |
$ |
500 |
||||||
Uses: Payment of costs associated with obtaining the new term notes Payment of professional fees on the effective date directly attributed to the bankruptcy |
(25) (50) |
|||||||
Net cash activity on the effective date |
$ |
425 |
||||||
(2) Adjustment to reflect the issuance of new term notes on the effective date of $500, offset by $25 of issuance costs associated with obtaining the term notes |
||||||||
(3) Adjustment to reflect the cancellation of predecessor common stock and APIC as a reorganization adjustment in accordance with the plan of reorganization. It would also be acceptable to reflect this adjustment within the Fresh-start adjustments column. |
||||||||
(4) Reorganization adjustment to reflect the settlement of $4,000 of liabilities subject to compromise in accordance with the plan of reorganization as follows: |
||||||||
Liabilities subject to compromise |
$ |
4,000 |
||||||
New common stock and paid-in-capital used to satisfy lender claims |
(2,910) |
|||||||
Gain on settlement of liabilities subject to compromise |
$ |
1,090 |
||||||
(5) Fresh-start adjustments to PP&E, goodwill, intangible assets, and long-term debt reflect the adjustments of the assets and liabilities of the successor to their fair values, including intangible assets not previously recognized: |
||||||||
Property, plant, & equipment |
$ |
600 |
||||||
Goodwill (excess of reorganization value above identifiable assets) |
100 |
|||||||
Intangibles |
275 |
|||||||
Long-term debt |
(15) |
|||||||
Total adjustments |
$ |
960 |
||||||
(6) Fresh-start adjustment to retained earnings (accumulated deficit) resets accumulated deficit to zero. |
Enterprise value |
$3,400 |
Accounts payable |
400 |
Accrued liabilities |
200 |
Reorganization value |
$4,000 |
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