“Carve-out financial statements” is a general term used to describe financial statements derived from the financial statements of a larger parent entity. Carve-out transactions might occur when a parent entity wishes to pursue a sale, spin-off, or initial public offering (IPO) of a portion of the parent entity. Carve-out financial statements are needed to complete a carve-out transaction and reflect the portion of a parent entity’s balances and activities that are the subject of the transaction. Certain SEC staff guidance addresses some elements of carve-out financial statements (e.g., when the statements will be included in an SEC filing), and parent entities often refer to the SEC staff’s guidance on preparing financial statements for nonpublic carve-out entities. However, there is no single set of comprehensive guidance on preparing carve-out financial statements.
To help streamline the preparation of carve-out financial statements, this publication summarizes key factors to consider. Such considerations are presented in the following chapters: