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Generally, management should not use hindsight to prepare carve-out financial statements. Management should determine the information it believes was available at the time the historical financial statements of the parent entity were prepared. For example, a customer of the carve-out business may file for bankruptcy in a period subsequent to the filing of the parent entity financial statements. Management should generally not write-off receivables from this customer when preparing the carve-out financial statements for an earlier period, unless there was information available at the time of the preparation of the parent entity financial statements which would indicate such receivables were not collectible.
A similar approach is applied for legal contingencies that changed in subsequent periods. See Example FSP 28-2 for our view for recording a recognized subsequent event that arises for a subsidiary after its parent company’s financial statements are issued.
If information obtained in preparing carve-out financial statements results in the identification of errors (i.e., information available at the time of the preparation of the parent entity financial statements that was not considered), consideration should be given to whether the carve-out financial statements should be adjusted. Consideration should also be given to the potential effect on the previously issued consolidated financial statements of the parent entity. See FSP 30.7 for more information on correction of errors.

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