Discussion:Accumulated Deficit
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Discussion Forum Index --> Accounting Questions --> Accumulated Deficit
| 12 April 2007 | |
| Can a company collapse their accumulated deficit from prior year to Additional paid in capital of current year? | |
| April 12, 2007 | |
| Good question. I would say "no" because companies are required to separately state each component of equity. It would be nice for the client to be able to do this, though, wouldn't it? Think about it from a potential purchaser's position -- the company would be hiding the fact that they have not been able to turn a profit. | |
| 13 April 2007 | |
| Thanks Natalie
While i was researching this topic on google i came across One company named Infinium Labs Inc on Yahoo finance - one of their notes stated that they offsetted the accumulated defcit against the addtional paid in capital. Unfortunately when i go online today to access that document - it says expired. Could you help me understand how they have done it? | |
| April 13, 2007 | |
| Well, if they did it, it sounds like it was simply a journal entry and a disclosure. You know, I can't provide you with any citations regarding this issue. It's just my gut feeling that this generally isn't allowed. It could be, however, that if full disclosure is given, that it is allowed. I'm sorry I can't provide more information at this time. | |
Bushmaster (talk|edits) said: | 13 April 2007 |
| I agree with Natalie. I don't like it for several reasons even if I thought you could do it, which I don't. | |
| 17 April 2007 | |
| Hey Thanks to both of you.
I have a definite answer. It is possible to collapse the accumulated deficit against addtional paid in capital under Quasi-Reorganization by reducing the par value of the stock. This kind of re organization requires approval of the share holders and this is helpful for companies to get a fresh start. Following will be the JE Debit: Common stock Credit: Retained Earnings Credit:Addtional paid in capital | |
| April 17, 2007 | |
| Thanks for that info! I hadn't even thought of reorganization as an option. | |
