What qualifies as a debt modification?

What qualifies as a debt modification?

A debt modification may be accounted for as (1) the extinguishment of the existing debt and the issuance of new debt, or (2) a modification of the existing debt, depending on the extent of the changes. Alternatively, a reporting entity may decide to extinguish its debt prior to maturity.

Do you capitalize loan modification fees?

Given that the modification is non-substantial, the carrying amount is based on the original effective interest rate. The directly attributable transaction costs are capitalised as part of the new carrying amount and amortised over the remaining term of the modified loan.

What is asc470?

This Topic comprises six Subtopics (Overall, Debt With Conversion and Other Options, Participating Mortgage Loans, Product Financing Arrangements, Modifications and Extinguishments, and Troubled Debt Restructurings by Debtors).

What is the 10% test for debt modification?

To perform the 10% test, the discounted cash flows of the original debt are compared to those of the new debt as of the modification date. Because the change in present value of cash flows is less than 10%, the change is considered a modification.

How do you calculate modified gain or loss?

The modification gain or loss is equal to the difference between the present value of the cash flows under the original and modified terms discounted at the original EIR.

What is modification cost?

Modification cost means the difference between the estimate of the net present value of the remaining cash flows assumed for the direct loan or loan guarantee contract before and after the modification.

How do you account for troubled debt restructuring?

A troubled debt restructuring is generally not considered to have occurred if the debtor can obtain funds from other sources than its existing lender. The accounting for troubled debt restructuring spans a number of payment instruments, including accounts payable, notes payable, and bonds.