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The following disclosures should be considered in a reporting entity's financial statements during a period of financial distress that may result in a bankruptcy filing:
  • A description of the events leading up to and during bankruptcy and a summary of the impacts and timeline of the bankruptcy proceeding:
This basic information regarding the case should include the filing date, the subsidiaries included in the filing, the jurisdiction where the case is being heard, the petition number, and other information that would allow the reader to gain an understanding of the proceedings or where such information can be located.
  • A description of key events that have occurred during the reporting period or prior to the issuance of the financial statements:
These might include key hearings before the Court (such as agreements allowing the reporting entity to pay certain creditors), agreement reached with creditors, decisions made by management as a result of the bankruptcy, or other events that would be of interest to the user of the financial statements. As the filings and related information are publicly available, the disclosures included in the financial statements should be consistent with that made available by the Court.
  • Although not required to be included in the disclosures specifically related to the bankruptcy, the impact of the filing on other areas of the financial statements would likely be required to be disclosed under other applicable GAAP. For example, debt covenant violations, impairments of intangible or long-lived assets, going concern considerations, and other accounting matters should be disclosed as appropriate.
  • The status of any debtor-in-possession financing and exit financing, including the terms of the debt and the status of Court approval should be disclosed.
  • While under debtor-in-possession status, the financial statements should be labeled as such.
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