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. Retained Earnings

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

    1. In accounting, it is where costs to acquire an asset are included ...
  6. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
RELATED FAQS
  1. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  2. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  3. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  4. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  5. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... Read Full Answer >>
  6. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... 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

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  7. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  8. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  9. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  10. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!