United States

New edition: Accounting for debt modifications and restructurings

FINANCIAL REPORTING INSIGHTS  | 

We have published a new edition of A guide to accounting for debt modifications and restructurings (formerly titled Fundamentals of accounting for debt modifications and restructurings), our comprehensive publication that explains and illustrates the accounting guidance applicable to debt modifications, restructurings and exchanges. Our guide primarily focuses on the following two subtopics in the Financial Accounting Standards Board’s Accounting Standards Codification (ASC):

  • ASC 470-50, “Debt – Modifications and Extinguishments”
  • ASC 470-60, “Debt – Troubled Debt Restructurings by Debtors”

The new edition includes updates that address various practice issues, including the following:

  • Determining whether the same lender is involved before and after changes are made to the debt
  • Assessing multiple changes to the same debt within a one-year period
  • Changing from a term loan to a line-of-credit or revolving debt arrangement or vice versa

Additional examples also are included in the new edition, including examples that illustrate:

  • Accounting for changes to debt that meet the liability derecognition threshold
  • Determining whether changes to debt that include the transfer of assets and the modification of terms meet the definition of a troubled debt restructuring (TDR) and applying the TDR accounting model to those changes
  • Accounting for a TDR with a variable interest rate
  • Determining the accounting model that should be applied to changes to prepayable debt with a partial repayment of principal and applying the appropriate accounting model to those changes
  • Determining the accounting model that should be applied when there are multiple changes to prepayable debt within a one-year period

A complete list of all the topics covered and examples provided in our debt modifications and restructurings guide is included in its table of contents.

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