What to consider for carve-out transactions

On the Radar: Carve-out financial statements

Carve-out financial statements are required when larger parent entities wish to pursue a sale, spin-off, IPO, or SPAC transaction involving a portion of their business. This edition of On the Radar features key management considerations and common pitfalls associated with the preparation of carve-out financial statements, as there is no single set of comprehensive guidance on preparing such statements.


The need for carve-out statements is growing.

The volume of IPO and SPAC transactions has decreased since reaching record levels in 2020 and 2021; however, divestiture activity (for which carve-out financial statements are often required) remains strong. As noted in Deloitte’s Divestitures Quarterly Update — Q2 2023, the number of divestiture deals grew by 85% quarter on quarter, while overall merger and acquisition activity grew by only 11%. At the same time, private equity buyers’ interest in divestitures grew significantly, with private equity accounting for 29% of the buyers in the second quarter of 2023 compared with 2% in the first quarter.

Management often may need to use judgment and carefully plan ahead when preparing carve-out financial statements since such a process can be challenging. Considerations management should take into account when preparing carve-out financial statements include the following:

  • Assembling the right team
  • Determining the transaction’s structure and scope
  • Materiality and evaluating misstatements
  • Internal controls
  • Supporting documentation
  • Significant judgments and estimates
  • Working with auditors
On the radar: Carve-out financial statements

Continue your carve-out financial statements

Deloitte’s Roadmap Carve-out financial statements provides a comprehensive discussion of key factors for entities to consider as they prepare their carve-out financial statements.

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