SOP 90–7 provides technical guidance to help fill the void in literature related to entities that have filed bankruptcy petitions or where the entities have emerged from Chapter 11 under confirmed plans. The SOP does not apply to debt restructurings outside Chapter 11, nor does it apply to governmental entities or entities that liquidate or adopt liquidation plans under the Bankruptcy Code.

Prior to SOP 90–7, significant diversity existed related to the accounting for professional fees and similar expenses associated with the reorganization plan. Some entities capitalized these costs and deferred expensing items until the plan was confirmed, and then were applied to reduce the gain on debt adjustments. Others accrued these costs at the filing date while still others expensed these costs as incurred. SOP 90–7 eliminates the inconsistency by requiring that professional fees and similar costs be expensed as incurred. These costs should be reported under the reorganization items caption in the statement of income.

The full text of SOP 90–7 is available in AICPA Technical Practice Aids. 

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