As a result of the persistent poor economy, more companies are filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. So-called “fresh start” accounting is available for many of them. New accounting pronouncements, however—principally new rules for business combinations and fair-value measurements—have made the application of fresh-start accounting even more complicated than ever.
Fresh-start accounting begins with Accounting Standards Codification Topic 852, Reorganizations. The concept of a fresh start allows a company that has undergone a legal reorganization essentially to erase its prior accounting records and start anew, by establishing a new basis of accounting for all (or ...