Carve-out guide offers a comprehensive roadmap to help companies navigate complex accounting and reporting issues with confidence

As divestitures and spin-offs become central to corporate strategy, CFOs are under pressure to deliver audit-ready carve-out financials that meet regulatory scrutiny and investor expectations. Grant Thornton’s recently released “Carve-out Financial Statements” guide sheds light on the often-overlooked challenges of carve-outs, particularly in Security and Exchange Commission (SEC)-regulated environments, where early planning and a clear understanding of financial reporting requirements are essential.

“Carve-outs are strategic inflection points that demand precision, foresight and financial leadership,” said Greg Bryen, a director within the CFO Advisory Services practice at Grant Thornton Advisors LLC. “Understanding the nuances early can make the difference between a smooth transaction and a costly delay.”

According to the guide, here are five key insights Chief Financial Officers (CFOs) should consider when preparing carve-out financials:

1. Complexity demands expertise. Preparing carve-out financials involves significant judgment. From defining the scope of the carve-out to dividing up assets, liabilities and expenses, there are few prescriptive rules. CFOs must ensure they have the right internal capabilities or engage external specialists to navigate the process effectively.
2. Regulatory requirements vary. The purpose of the carve-out — whether for an IPO, spin-off or acquisition — determines the applicable reporting standards. SEC registrants, public business entities, or SEC filers each face distinct accounting and disclosure standards. To ensure full compliance and manage the complexity and tight timelines involved in preparing audit-ready standalone financials, finance leaders often turn to external providers during the carve-out process.
3. Expenses must be allocated correctly. Carve-out statements must reflect the full cost of operating the carved-out entity. This often requires allocating shared parent-company expenses using a reasonable, supportable and auditable method. Poor documentation can undermine the credibility of the financials.
4. Asset and liability attribution is not straightforward. Assigning assets and liabilities — especially those historically shared or centrally managed, such as cash or long-lived assets — requires careful analysis and judgment based on factors like usage, legal ownership and transferability with the carve-out. Missteps here can distort the carve-out’s financial position and affect valuation.
5. Materiality thresholds shift. What’s immaterial at the parent-company level may be significant for the carve-out, requiring more detailed analysis, possible retrospective adjustments and enhanced audit support. This shift impacts everything from disclosures to internal controls, requiring a more granular approach to financial reporting.

“Our clients often navigate carve-outs with limited support, and this guide was developed to close that gap,” said Shalin Pathak, principal at Grant Thornton Advisors LLC. “We’re not just helping clients meet requirements — we’re helping them prepare early, avoid pitfalls and make better strategic decisions.”

To download Grant Thornton’s “Carve-out Financial Statements” guide, visit: https://www.grantthornton.com/insights/newsletters/audit/2025/viewpoint/preparation-of-carve-out-financial-statements.

About Grant Thornton

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