Present Value Debt Restructure

Question 1

Info

Answer 1

Started on 16 Aug. 2014 @ 5.15 PM
Total questions 7
To do at a time 7
Practice session 75 or 76

Question 2

Fair value requirement.

Answer 2

Debt modifications may be valued at fair value.
An election can be made to value certain financial assets or financial liabilities at fair value. Modification of debt is eligible for such valuation. However, the fair value election is not a requirement.

Question 3

In a troubled debt restructuring, when the fair value option is not elected, if a non cash asset is exchanged to settle the debt:

Answer 3

The non cash asset is revalued to fair value, with a gain or loss recognized on the asset.
when a noncash asset is exchanged to settle debt, it must be revalued to fair value with a gain or loss recognized on the asset.

Question 4

For a troubled debt restructuring involving only modification of terms, it is appropriate for a debtor to recognize a gain when the carrying amount of the debt

Answer 4

Exceeds the total future cash payments specified by the new terms.
the debtor records a gain at the date of a restructure involving only a modification of terms when the prerestructure carrying amount exceeds the total future cash flows per the modification. The gain recognized is the difference between the prerestructure carrying amount and the future cash flows.