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Upon emergence from bankruptcy, a reporting entity should consider the following disclosures as outlined in ASC 852-10-50:
  • Upon confirmation of the plan of reorganization, disclosure of the confirmation and effective dates. In addition, the general terms of the confirmed plan should be included with sufficient detail to provide the reader with a summary of how the plan of reorganization addresses the various creditor classes, how the reporting entity will be restructured under the terms of the plan, the existence and terms of any other arrangements (such as exit financing, warrants, and contingencies) that will be resolved in the periods following emergence.
  • A reconciliation of the impact on each balance sheet account from the reorganization and application of fresh-start reporting in a tabular format with the following columns: predecessor company balance sheet, effects of reorganization plan, fresh-start adjustments, and successor company balance sheet (the “fresh-start table”), and footnote descriptions of the significant reorganization and fresh-start adjustments within the fresh-start table (see Example BLG 4-2). The descriptions should provide sufficient information supporting the balances in the opening balance sheet of the emerging entity, including tables, if appropriate.
  • The basis for each adjustment presented in the fresh-start table, including the entries reflecting the discharge of debt obligations, issuance of any common and preferred stock as part of the reorganization, and any other adjustments or transactions resulting from the reorganization and application of fresh-start reporting. For fresh-start adjustments to assets and liabilities, the methods and assumptions used to develop fair value should be provided.
  • A description of how any gains or losses related to the reorganization and the adoption of fresh-start reporting were calculated
  • A description of how the amount of "excess reorganization value" or goodwill was calculated or determined
  • If the reporting entity emerges from bankruptcy and uses a convenience date to record the adoption of fresh-start reporting, disclosure of this fact and the relationship to the actual effective date of the confirmation becoming effective. It should be noted that financial results in the period between the actual date and the convenience date are immaterial (if they are not immaterial, the reporting entity should consider if the use of the convenience date is appropriate).
  • If a reporting entity emerges from bankruptcy and qualifies for fresh-start reporting as a new reporting entity for financial reporting purposes (see BLG 4.1), a vertical black line is required to be presented in the financial statements separating the predecessor reporting entity from the successor reporting entity, highlighting the change in basis between the reporting entities. In the basis of presentation footnote disclosure, we believe a clear distinction should be made to denote that the predecessor company and the successor company are separate reporting entities and as such are not comparable. The reporting entity should consider disclosure that discusses any changes in accounting policies or principles, including the adoption of new accounting standards by the successor company. Reporting entities qualifying for fresh-start reporting that emerge during an interim period should consider including a complete description of the successor entity’s accounting policies as these are the initial financial statements of the successor entity. See FSP 17.6.5 for an illustrative example of blackline financial statements.
In addition to the disclosures above, when preparing the disclosures required under ASC 852-10-50-7, a reporting entity should consider the following:

ASC 852-10-50-7

Paragraph 852-10-45-21 requires additional information to be disclosed in the notes to the initial fresh-start financial statements when fresh-start reporting is adopted. That additional information consists of the following:
a. Adjustments to the historical amounts of individual assets and liabilities
b. The amount of debt forgiveness
c. Significant matters relating to the determination of reorganization value, including all of the following:
1. The method or methods used to determine reorganization value and factors such as discount rates, tax rates, the number of years for which cash flows are projected, and the method of determining terminal value
2. Sensitive assumptions – that is, assumptions about which there is a reasonable possibility of the occurrence of a variation that would have significantly affected measurement of reorganization value
3. Assumptions about anticipated conditions that are expected to be different from current conditions, unless otherwise apparent.

When determining reorganization value, Reporting entities may also consider disclosing the following:
  • Values established by the Court, including any ranges of values considered and the point within the range that was selected
  • A description of how the enterprise value is used to derive the reorganization value (see discussion of reorganization value in BLG 4.3.1)
Reporting entities should also consider the fair value disclosures required by ASC 820, Fair Value Measurements.

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