A company or an entity in financial distress or difficulty may be permitted by the Securities and Exchange Commission (SEC) to undergo a quasi-reorganization and in the process may be allowed to revalue its property, plant and equipment if their current value is substantially more than their cost.
Quasi-reorganization must be approved by the SEC and consider the requirements as follows:
1. An independent expert or specialist is needed if the result of the quasi-reorganization is the revaluation of property, plant and equipment.
2. The increase in the value of the property, plant and equipment is credited to "revaluation surplus".
3. The adjustments concerning "Other" assets shall be made through the retained earnings.
4. The resulting deficit from the quasi-reorganization is offset against the revaluation surplus.
5. Retained earnings subsequent to quasi-reorganization shall be restricted to the extent of the deficit wiped out during the reorganization and cannot be declared as dividend.
6. Losses subsequent to quasi-reorganization cannot be charged to the remaining revaluation surplus.
7. The quasi-reorganization shall be disclosed for at least 3 years.
