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. Capitalization

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

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

    The common set of accounting principles, standards and procedures ...
  5. Retained Earnings

    The percentage of net earnings not paid out as dividends, but ...
  6. Stockholders' Equity

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

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center