Spin-off transactions are accounted for using a carryover basis of accounting. In this type of transaction, no realization occurs with respect to previously accumulated elements of OCI reported by the parent and subsidiary. Thus, the post-spin financial statements of a subsidiary should generally reflect the OCI that was previously accumulated in the parent's financial statements related to assets and liabilities of the subsidiary. Likewise, the post-spin financial statements of the spinnor should only reflect its remaining AOCI after the spin. In the spinnor's financial statements, this would not be considered a reclassification adjustment. However, when the spinnor is disclosing its rollforward of AOCI, the spinnor will need to show the impact of the spin-off.

Question FSP 4-3 addresses the presentation of AOCI attributable to the assets and liabilities of the subsidiary post spin.

AOCI related to Sub Co's assets and liabilities existing at the date of the spin should be maintained in the opening equity accounts of the post-spin entity. That is, AOCI should not be collapsed into APIC as is typical for many other components of pre-spin equity.

Regarding CTA in AOCI of Parent Co, management should identify only the CTA related to Sub Co's subsidiaries or foreign operations. For example, if Sub Co has a different functional currency from Parent Co, CTA arising from Parent Co's consolidation of Sub Co prior to the spin should not be reflected in Sub Co's post-spin financial statements.