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A Roadmap to accounting and financial reporting for carve-out transactions

Published on: Sep 18, 2015

Parent companies often have questions about how to prepare “carve-out financial statements” (separate financial statements derived from the financial statements of a larger parent company). Certain SEC staff guidance addresses some elements of carve-out financial statements (e.g., when the statements will be included in an SEC filing), and parent companies often analogize to the SEC staff’s guidance on preparing financial statements for nonpublic carve-out entities. However, there is no single set of comprehensive guidance on preparing financial statements for carve-out entities.

To help companies streamline the preparation of these financial statements, Deloitte’s A Roadmap to Accounting and Financial Reporting for Carve-Out Transactions summarizes key factors for them to consider. Such considerations are presented in the following sections and appendixes:

  • Overview — Discusses the basic principles of a carve-out transaction and provides considerations for management to use in identifying the carve-out entity and navigating the carve-out process.
  • Management Considerations — Highlights some practical considerations that management should take into account when preparing carve-out financial statements.
  • Section 1, Accounting Considerations Related to a Carve-Out Entity’s Balance Sheet — Provides accounting and disclosure guidance on common balance sheet items included in the carve-out financial statements.
  • Section 2, Accounting Considerations Related to a Carve-Out Entity’s Statement of Comprehensive Income — Provides accounting and disclosure guidance on common income statement items included in the carve-out financial statements.
  • Section 3, Other Accounting and Financial Reporting Items — Expands on the items introduced in Sections 1 and 2 by providing additional accounting and financial reporting guidance on topics such as income taxes, discontinued operations, and subsequent events.
  • Section 4, SEC Reporting Topics — Discusses the various SEC accounting and financial reporting topics that carve-out entities and the parent company need to consider when preparing IPO filings and post-carve-out-transaction SEC filings.
  • Appendix A — Glossary containing the full titles of topics, standards, and regulations used in the Roadmap.
  • Appendix B — Glossary containing the full forms of acronyms used throughout the Roadmap.
  • Appendix C — Glossary containing definitions of terms used throughout the Roadmap.

This publication was updated in 2015 to reflect (1) changes to the criteria for reporting a disposal as a discontinued operation as a result of FASB Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, and (2) the SEC’s nullification of Staff Accounting Bulletin Topic 5.J, “New Basis of Accounting Required in Certain Circumstances,” in response to FASB Accounting Standards Update No. 2014-17, Push Down Accounting.


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