What's there to understand? I can summarize it in a few sentences.
Troubled debt restructurings
Settlement in full with a transfer of assets for carrying amount or equity interest
creditor recognizes a loss which equals
debtor recognizes a gain on the liability and on the asset disposition
Modification of terms when future cash flows exceed the carrying amount
Undiscounted cash flow (UCF): if greater than carrying amount, no gain is recognized for debtor
Otherwise gain based on carrying amount
Creditor: does discount the value of the new debt and recognizes loss based on DCF
Modification of terms when future cash flows are less than the carrying amount
Debtor recognizes gain based on UCF and carrying amount
Creditor: does discount the value of the new debt and recognizes loss based on DCF
IFRS: debt extinguishment: old debt and new debt are different (cash flows differ by 10%)
Use discounted amount
BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)
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