Quasi-reorganizations in Practice.

This article examines discernible patterns in quasi-reorganization procedures. The term quasi-reorganization denotes a procedure equivalent to an accounting fresh start. A company with a debit balance in retained earnings starts over with a zero balance rather than a deficit. A quasi-reorganization involves the reclassification of a deficit in retained earnings to paid-in capital, and may also include a restatement of the carrying values of assets and liabilities to reflect current values. A task force of the Accounting Standards Division of the American Institute of Certified Public Accountants is now considering issuing new guidelines for the quasi-reorganization procedure. A review was made of annual reports of firms that had recently used the quasi-reorganization procedure. The companies for this study were selected by reviewing the annual reports of approximately 4,000 companies over a five year period: June 30, 1981 to June 30, 1986. The accounting and reporting characteristics examined were the date of the quasi-reorganization, reasons given for the quasi-reorganization, balance sheet adjustments made, and amount of detail provided.