There is no legal or accounting definition for carve-out financial statements. Rather, carve-out financial statements reflect the separate financial results and financial position of a portion of a larger entity, which can take the form of a subsidiary, an operating unit, a product line, or a brand. The financial statements presented may or may not be of a legal entity, which can lead to complexities in the basis of presentation of carve-out financial statements.
When determining whether carve-out financial statements are needed, the reporting entity should consider the nature of the planned divestiture, including any contractual or SEC reporting requirements. Often, the completion of a transaction or the related deal financing can be contingent on providing carve-out financial statements.
When the carve-out financial statements are to be included in an SEC filing, applicable SEC rules will determine the form of the filing, the annual and interim financial statements required, the age of the financial statements, and whether the financial statements need to be audited.