When fresh-start reporting is used according to Statement of Position (SOP) 90-7 (now incorporated in FSB ASC topic 852), the implication is that a new firm exists.Which of the following statements is not same comment as ta #10 correct about fresh-start accounting?

Question

Quizplus · Accepted Answer

Statement C is incorrect because there is no requirement that the fair value of the assets must be less than the post liabilities and allowed claims. In fact, the fair value of the assets could be greater than the post liabilities and allowed claims, resulting in positive beginning retained earnings. Statement A is correct because assets are reported at fair values. Statement B is correct because beginning retained earnings is reported at zero. Statement D is correct because the original owners must own less than 50% of the voting stock after reorganization, otherwise it would not be considered a new firm.

When Fresh-Start Reporting Is Used According to Statement of Position