Quasi-Reorganization

AAA

DEFINITION of 'Quasi-Reorganization'

A relatively obscure provision under U.S. GAAP which provides that under certain circumstances, a firm may eliminate a deficit in its retained earnings account by restating assets, liabilities and equity in a manner similar to a bankruptcy. A firm's stockholders must agree to allow the accounting change, which essentially resets the firm's books as though a new company had incurred the assets and liabilities of the old firm.

INVESTOPEDIA EXPLAINS 'Quasi-Reorganization'

Although the idea of quasi-reorganization has seen some renewed interest, the provision is still rarely applied in practice. The idea of quasi-reorganization holds appeal for some as the idea of a "fresh start" is more exciting to investors than slowly digging out from a large deficit of retained earnings. Some also argue that quasi-reorganization could be an effective method of more accurately resetting the accounting balances of a firm when a serious drop in asset values is not adequately reflected. Quasi-reorganization remains highly controversial, however, since it is not truly a change of economic reality, but rather a method to make books appear more favorable.



RELATED TERMS
  1. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  2. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
  3. Cramdown

    A bankruptcy concept that is often employed to obtain a Chapter ...
  4. Capitalization

    1. In accounting, it is where costs to acquire an asset are included ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
Related Articles
  1. Bankruptcy Protection For Your Accounts
    Retirement

    Bankruptcy Protection For Your Accounts

  2. The Ghouls And Monsters On Wall Street
    Retirement

    The Ghouls And Monsters On Wall Street

  3. Distressed Debt An Avenue To Profit ...
    Bonds & Fixed Income

    Distressed Debt An Avenue To Profit ...

  4. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center