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. Cramdown

    A bankruptcy concept that is often employed to obtain a Chapter ...
  3. Generally Accepted Accounting Principles ...

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

    The percentage of net earnings not paid out as dividends, but ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
RELATED FAQS
  1. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  2. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  3. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
  4. How does quantifying fixed overhead volume variance show whether a company is profitable ...

    Fixed overhead volume cannot definitively prove a company is profitable, but it can be used to provide an excellent indication ... Read Full Answer >>
  5. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  6. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
Related Articles
  1. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  2. Retirement

    The Ghouls And Monsters On Wall Street

    Learn about some of the creepiest cases of fraud and the characters behind them.
  3. Bonds & Fixed Income

    Distressed Debt An Avenue To Profit In Corporate Bankruptcy

    Use debt securities to attack bankrupt companies and scavenge them for profits.
  4. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  5. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  6. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  7. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  8. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  9. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  10. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center