Which statement is FALSE regarding financial reorganizations?
A) The proposed reorganization should receive the approval of the corporation's shareholders before it is put into effect.
B) The new asset and liability valuations should be fair.
C) Subsequent to the financial reorganization, no disclosures are required in subsequent periods.
D) After the reorganization, the corporation must have a zero balance in the Retained Earnings account.

Question

Quizplus · Accepted Answer

Subsequent to a financial reorganization, there are additional disclosures that need to be made in subsequent periods, including the reasons for the reorganization and its effects on the company's financial statements. Choice A is true, as shareholder approval is often necessary for a financial reorganization. Choice B is true, as the valuation of assets and liabilities should be fair to all parties involved. Choice D is false, as a financial reorganization does not necessarily require a zero balance in the Retained Earnings account.

Which Statement Is FALSE Regarding Financial Reorganizations