Generally, upon emergence from Chapter 11 of the U.S. Bankruptcy Code, a company’s balance sheet is required to be restated to fair value, in accordance with the principles of fresh start accounting. AICPA SOP 90-7 states that the reorganization value of an entity adopting fresh start accounting should be allocated to the entity’s assets in conformity with the procedures specified by Statement of Financial Accounting Standards No. 141R. SFAS 141R requires the reorganization value to be allocated to its assets and liabilities based on their fair values.
The steps involved include estimation of reorganization value, allocation of reorganization value and goodwill to various reporting units, and estimation of the fair value of tangible and intangible assets. The assets to be valued include inventory, real property, machinery and equipment, technology, customer relationships, trade names and goodwill.