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Fresh-Start Reporting

By John M. Bonora

Emergence from bankruptcy presents a series of challenges for debtor companies, their creditors and counsel for all interested parties. One of the most significant challenges is financial reporting. How will the reorganized entity report? How and why does the entity's value change during the reorganization process? What is the process required to ensure that the emerging entity reports in a manner that is transparent, and that allows creditors and investors to understand the fiscal health of the “new” company?

For a select group of companies, the steps toward emergence and transparency are clearly laid out. Companies that successfully reorganize and meet a strict set of criteria qualify for fresh-start reporting ' the reporting requirements for qualifying emerging entities as promulgated by the American Institute of Certified Public Accountants (AICPA) Statement of Position 90-7 (SOP 90-7), “Financial Reporting for Entities in Reorganization Under the Bankruptcy Code.”

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