Discussion: “The Association between Firms' Values and Accounting Numbers after Adoption of Fresh Start Reporting”

This paper has several nice features. First, the topic—fresh start reporting (FSR) of firms emerging from bankruptcy reorganization under Chapter 11—is inherently very interesting. The palates of researchers and teachers, accustomed to a diet of information on surviving firms, might well be stimulated by the institutional appetizers Reuven Lehavy serves up. For example, I was unaware of the FSR arrangements under SOP No. 90-7 and discovered that it provides a rare case in which U.S. accounting rules provide for revaluation of nonmarketable assets. While it is not exploited in this study, I was intrigued by the financial recontracting that occurs in the reorganization when debt in the failed firm is swapped for equity in the emerging firm.