Quasi-Reorganizations In Practice

A review of quasi-reorganizations is performed in order to identify financial reporting issues and to determine if the financial reporting is adequate to inform investors and creditors. During the 5-year period reviewed, 22 companies were found that had used the quasi-reorganization procedure. The database used was the National Accounting Research System. Accounting and reporting characteristics that were examined included the date of the quasi-reorganization and reasons given for the quasi-reorganization. Results suggest that the date of the quasi-reorganization is not significant since the concept includes the nation of a fresh start. Other conclusions are: 1. A firm should be permitted to elect a quasi-reorganization when a deficit represents a material erosion of invested capital. 2. A restatement of assets, liabilities, and stockholders' equity should be included. 3. The methodology used in the revaluation would help users in understanding the quasi-reorganization. 4. Disclosure of the accounts affected and the amounts of the adjustments also would be helpful.