Troubled Debt Restructuring

Question 1

Extraordinary gain (loss) calculation (debtor)

Answer 1

Carrying amount of liability liquidated - FV of asset transferred

Question 2

Ordinary gain (loss) calculation (debtor)

Answer 2

FV of asset transferred - Carrying amount of liability liquidated

Question 3

For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared to the carrying amount of the debt to determine if the debtor should report a gain on restructuring?

Answer 3

The amount of future cash payments designated as principal repayments.

Question 4

When a loan receivable is impaired but foreclosure is not probable, which of the following may the creditor use to measure the impairment?

Answer 4

I. The loan’s observable market price.

II. The fair value of the collateral if the loan is collateral dependent.