Contour of §363 Transactions: Revenue Transfer and Cut-Over of Accounting Systems

Citation: Bakhovuddin Sadriddin Ogli Muratov, "Contour of §363 Transactions: Revenue Transfer and Cut-Over of Accounting Systems", Universal Library of Arts and Humanities, Volume 02, Issue 04.

Copyright: This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In the context of a growing wave of corporate bankruptcies in 2024–2025, §363 asset sale transactions have in fact emerged as the predominant restructuring format, valued by participants primarily for their procedural speed and the possibility of transferring property to the purchaser free and clear of encumbrances. At the same time, the study demonstrates the existence of a fundamental interdisciplinary gap: the legal advantages of the §363 structure are paradoxically translated into significant, but in many respects latent, accounting and operational risks for the acquirer. The purpose of the article is to conceptualize and analyze these points of friction arising, on the one hand, during the redistribution of revenue and, on the other hand, during the migration of accounting systems in the post-transaction period. The study relies on a three-contour model (Law–Accounting–IT), within which the regulatory requirements of the US Bankruptcy Code are compared with the provisions of US GAAP (ASC 805), and a practice-oriented case analysis is carried out, including the Acorda Therapeutics transaction (2024). It is shown that the legal cleansing of obligations through the §363(f) mechanism does not eliminate for the buyer the obligation arising from ASC 805 to recognize assumed deferred revenue obligations (deferred revenue) at fair value. Moreover, the extremely compressed timeframe for closing the transaction (about 100 days in the Acorda case) de facto forces the parties to resort to a high-risk strategy of a one-time Big Bang cut-over switch of the IT landscape, which creates a direct threat to the integrity and reliability of financial data (AR/DR). The key conclusion is that the economic price of a §363 transaction for the buyer should be assessed not only through the prism of the nominal value of the acquired assets, but also taking into account the fair value of inherited obligations, as well as the required budget to cover the operational risks of a forced IT migration. The results obtained are of direct practical interest to chief financial officers, chief information officers, and M&A specialists involved in the acquisition of distressed assets in bankruptcy proceedings.

Keywords: §363 Transactions, Chapter 11, Bankruptcy, Distressed Asset M&A, ASC 805, Revenue Recognition, Deferred Revenue, Migration of Accounting Systems, Cut-Over, Big Bang.

https://doi.org/10.70315/uloap.ulahu.2025.0204015