carve-out financial statements

Insightful Carve-Out Financial Statements

Carve-out financial statements are a specialized financial reporting service offered by CKH Group as part of our transaction advisory to assist businesses in the divestiture process. These statements become necessary when the net assets and results of operations of a business need to be extracted or “carved out” from a larger entity (such as for a sale or spinoff). The preparation of these financial statements involves a thorough examination of the financial intricacies associated with the specific transaction, ensuring accuracy, compliance, and transparency.

As a leading CPA firm based in Atlanta, we take pride in offering Transaction Advisory Services designed to:

    • Provide a reliable basis for decision-making
    • Set your business up for future growth
    • Save you time and effort through our expert knowledge

What Is A Carve-Out Financial Statement?

The term “carve-out” refers to the act of extracting or segregating the financial information of the business being divested from the larger entity. This is often necessary when a business goes through strategic transactions like a sale, spinoff, split-off, or an initial public offering (IPO). In these scenarios, a carve-out financial statement is a specialized financial report that serves as a financial snapshot of the divested business, providing essential information for decision-making and evaluation.

Carve-Out financial statements are common with large fortune 1000 companies, international companies, or publicly held companies with complex entity structures. Our extensive experience with fortune 1000 companies provides us with a unique set of skills to meet your custom needs.

The preparation of carve-out financial statements involves a meticulous allocation of assets, liabilities, and equity from the consolidated financial statements of the parent company to create standalone financials for the divested entity. This process requires a deep understanding of accounting principles, financial reporting standards, and the specific details of the divestiture transaction.

How does a Carve-Out Work?

A carve-out serves to separate a subsidiary or business unit from its parent, establishing it as an independent entity with its own board of directors and financial statements. This is why carve-out financial statements are crucial, as the new entity will have its own financial statements to account for. While the parent company often retains a controlling interest in the new company and provides strategic support and resources for its success, a key distinction from a spin-off is that the parent company typically receives a cash inflow through the carve-out process.

Whether it’s a carve-out or a divestiture, the parent organization must establish tax processes that facilitate the successful operation of each entity post-transaction, which is why it is important to have the advisement of an accountant throughout the process.

Carve-Outs and Income Taxes

Aside from needing carve-out financial statements, the preparation of carve-out financial statements introduces a challenging aspect related to the recognition of income taxes. This complexity arises from the often-existing disparity between the historical legal structure utilized by the parent entity for tax filings and the structure inherent in the carve-out entity. You can read more information on CKH Group’s business tax services here.

John Boynton, CKH Group

Why Choose CKH Group?

CKH Group’s Accounting and Advisory services are designed to help businesses navigate the complexities of financial management in today’s dynamic economic landscape.

With CKH Group, you’re not just getting a CPA firm; you’re gaining a trusted partner committed to your success. Discover the CKH Group advantage, where excellence, integrity, and expertise come together to create a powerful accounting and advisory partnership for you. Contact us today to explore how our accounting services can add value to your organization.

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Carve-Out Financial Statements