TDRs & Extinguishment

Question 1

Transfer of assets

Answer 1

Carrying amount of payable (liability)
- FV of asset transferred
= GAIN

Carrying amount of asset transferred
- FV of asset transferred
= LOSS

Question 2

Gain on restructuring

Answer 2

Cancellation of debt

- FMV asset exchanged

Question 3

Gain on disposal / exchange

Answer 3

FMV asset exchanged

- NBV asset exchanged

Question 4

What determines if the debtor should report a gain on restructuring?

Answer 4

Carrying amount - total future cash payments

=gain

Question 5

Extinguishment of debt

Answer 5

Whenever the debtor pays the creditor and is relieved of the obligation for the liability.

Paid in full

Question 6

TDR

Answer 6

Debtor in financial difficulty and can’t pay lender. Lender accepts transfer of assets or a modification of terms to grant concession to debtor; pays less

Question 7

Modification of terms

Answer 7

Use present value of expected future cash flows discounted at loans historical effective interest rate

Dr. Bad debt expense
Cr. Allowance for credit losses

Question 8

When a loan receivable is impaired but foreclosure is not probable what can the creditor used to measure impairment?

Answer 8

1) the loans observable market price

2) the FV of the collateral if the loan is collateral dependent

Question 9

Gain or loss on bond extinguishment BEFORE maturity

Answer 9

Reacquisition - net carrying amount

Also - NOTHING is “extraordinary”

Question 10

BOND extinguishment JE

Answer 10

Ex.

DR. Bond payable
CR. gain
CR. Discount on bonds payable
CR. cash