Fresh Start Accounting

Navigating the Complexity of Post-Bankruptcy Financial Reporting

Emerging from Chapter 11 bankruptcy is a significant milestone, but the technical reporting requirements that follow are among the most complex in the accounting profession. Under ASC 852 (Reorganizations), companies often must adopt “Fresh Start” accounting, which requires the entity to essentially “reset” its financial statements to fair value. This process is critical for establishing a transparent, credible baseline for new stakeholders, lenders, and investors.

We provide the institutional-grade technical depth required for reorganization. Fresh start accounting is more than just a valuation exercise; it is the construction of a new financial architecture. At Calvetti Ferguson, we work alongside legal counsel and reorganization specialists to ensure your new balance sheet is accurate, compliant with GAAP, and ready to support your post-emergence growth strategy.

Strategic Execution of ASC 852 Compliance

We guide management teams through the rigorous process of determining if the entity qualifies for Fresh Start reporting and executing the complex valuation and allocation requirements.

Qualification & Reorganization Value

The first step in the “reset” is determining if the entity meets the two-pronged test for Fresh Start reporting.

• • • Loss of Control Test: Verifying that the holders of existing voting shares before reorganization receive less than 50% of the voting shares of the emerging entity.

    • Reorganization Value vs. Liabilities: Confirming that the reorganization value of the assets is less than the total of all post-petition liabilities and allowed claims.

    • Determination of Reorganization Value: Assisting leadership in determining the “fair value” of the entity as a whole—the price a willing buyer would pay for the assets of the emerging organization.

Fair Value Allocation & Balance Sheet Reset

Once the reorganization value is established, it must be allocated to the entity’s assets in a manner similar to a business combination (ASC 805).

• • • Asset & Liability Valuation: Collaborating with valuation specialists to assign fair values to tangible and intangible assets, as well as liabilities.

    • Goodwill & Intangible Identification: Identifying and valuing previously unrecognized intangibles, such as trademarks, customer lists, or proprietary technology.

    • Debt Restructuring & Cancellation of Indebtedness (COI): Navigating the complex tax and accounting implications of debt that has been discharged or restructured as part of the plan.

Post-Emergence Financial Professionalization

A successful reemergence requires more than just a one-time accounting entry. It requires an institutional-grade financial function that can win back market confidence.

• • Establishing New Accounting Policies: Assisting the “new” entity in selecting and documenting accounting policies that align with its reorganized business model.

  • Internal Control Environment: Reviewing and strengthening internal controls to ensure the integrity of financial reporting from “Day 1” of the new entity.

  • Audit & Stakeholder Readiness: Preparing the opening balance sheet and the requisite disclosures to satisfy the scrutiny of new boards, creditors, and external auditors.

Why Choose Calvetti Ferguson?

We offer the technical resources of a national firm with the senior-level attention required during a company’s most sensitive transition.

• Multidisciplinary Advisory: We bring together experts in Valuation, Tax, and Technical Accounting to ensure your Fresh Start reset is holistic and defensible.

• Collaborative Partner: We work seamlessly with your bankruptcy attorneys and turnaround advisors to ensure the accounting treatment aligns with the court-approved plan of reorganization.

• PE & Creditor Perspective: We understand the reporting demands of the institutional investors and lenders who often form the backbone of a reorganized company’s capital structure.

Ready to Build Your New Financial Foundation?

Don’t let technical reporting hurdles delay your operational reemergence. Let’s build the transparent, high-integrity financial baseline your future deserves—partner with a firm that understands the intersection of restructuring law and enterprise value.

Contact Our Team