Page 80 - Bankruptcy Volume 1

 Business plan analysis. The debtor requires the analysis of historical data and preparation of
earnings and cash flow projections to develop the business plan.

 Feasibility of plan of reorganization. Cash flow projections can demonstrate the debtor’s capabil-
ity to fund the debt and interest payments required under the plan.

 Best interest of creditors. Schedules demonstrating the liquidating values of the debtor show how
much the creditors could receive in a liquidation compared to the amount that would be paid un-
der a Chapter 11 plan.

 Cramdown requirements. If a class of creditors does not accept the plan, special analysis may
show that the amount and the value of payments intended under the plan meet the requirements
necessary to overrule the creditors’ objections.

In addition to the analysis and preparation of accounting information, special consideration is given to
tax issues. Examples of selected decisions requiring analysis of the tax consequence include the follow-
ing:

 Timing of the bankruptcy petition filing

 Timing and selection of asset sales

 Timing and sequencing of transactions involving debt discharge

 Terms and content of plan

 Timing of effective date

Accountants must be aware of special issues requiring tax planning. Some of these issues are briefly dis-
cussed in chapter 17, "Income Tax Awareness Issues."

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