F10: Troubled Debt Restructurings Flashcards Preview

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Flashcards in F10: Troubled Debt Restructurings Deck (10):
1

Troubled debt restructuring definition

The creditor allows the debtor certain concessions to improve the likelihood of collection that would not be considered under normal circumstances

2

Examples of concessions made

-Reduced interest rates
-Extension of maturity dates
-Reduction of face amount of debt
-Reduction of amount of accrued interest

3

Troubled debt restructurings are often the result of what?

Legal proceedings or of negotiation between parties

4

Debtor Reporting: For transfer of assets, calculation for ordinary gain/loss

FV asset transferred
- NBV asset transferred
= Ordinary gain/loss

5

Debtor Reporting: For transfer of assets, calculation for possible extraordinary gain (NEVER A LOSS)

Carrying amount of payable
- FV of asset transferred
= Gain (possibly extraordinary)

6

Debtor Reporting: For transfer of equity interest, calculation for possible extraordinary gain (NEVER A LOSS)

Carrying amount of the payable
- FV equity transferred
= Gain (possibly extraordinary)

7

A restructuring that does not involve the transfer of assets or equity will often result in what?

A modification of the terms of the debt

8

How does the debtor account for the modification?

Prospectively

9

Creditor Reporting: when a creditor has received assets or equity as a full settlement, how are they accounted for?

At fair value at the time of restructuring

10

Credit Reporting: The excess of the recorded receivable over the fair value of the asset received is recognized as what?

An ordinary loss