009 Troubled Debt Flashcards
Describe the post-restructure interest rate for a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is greater than the book value of the original debt.
Rate that equates the book value of the original debt with the present value of restructured cash flows.
What is the amount of interest to be recognized after a troubled debt restructure modifies the terms of the original debt such that the sum of restructured cash flows is greater than the book value of the original debt?
Difference between the sum of restructured cash flows and the book value of the original debt.
What is the international accounting standard treatment of settlement troubled debt restructures?
Same as U.S. accounting but is considered an extinguishment.
List the two categories of modification of terms debt restructures for international accounting standards.
Significant modification and not significant modification.
What is the nature of restructured cash flows for a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is less than the book value of the original debt?
They are all treated as principal payments.
What is the amount of interest to be recognized after a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is less than the book value of the original debt?
No interest is recognized; all payments are considered principal payments.
Describe the debtor’s recording of a settlement restructure.
1 Gain = book value of debt + unpaid accrued interest - market value of consideration transferred; 2 Gain/loss on disposal of assets transferred; 3 Remove debt from books; 4 Record any stock issued at market value.
What requirements must exist for a debt restructuring to be troubled?
Creditor makes a concession, and debtor must be in financial difficulty.
