Scribd
Upload
250 views2 pages

Chapter 9 IA2

The document discusses debt restructuring and related accounting procedures under Chapter 9. It defines debt restructuring as concessions granted by creditors to debtors in financial distress. The three types of debt restructuring are asset swaps, equity swaps, and modification of terms. An asset swap involves transferring assets to creditors in payment of debt, while an equity swap replaces debt with equity instruments. Substantial modification of debt terms requires extinguishing the old debt and recognizing a new liability.

Uploaded by

klife
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
250 views2 pages

Chapter 9 IA2

The document discusses debt restructuring and related accounting procedures under Chapter 9. It defines debt restructuring as concessions granted by creditors to debtors in financial distress. The three types of debt restructuring are asset swaps, equity swaps, and modification of terms. An asset swap involves transferring assets to creditors in payment of debt, while an equity swap replaces debt with equity instruments. Substantial modification of debt terms requires extinguishing the old debt and recognizing a new liability.

Uploaded by

klife
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Intermediate Accounting 2

Homework
Note Payable (Chapter 9)

Chapter 9

1. What is a debt restructuring?


a. It is a situation where the creditor for economic or legal reasons related to the debtor’s
financial difficulties, grants to the debtor concession that would not otherwise be
granted in a normal business relationship.
2. What are the three types of debt restructuring?
a. The three types of debt restructuring:
i. Asset swap
ii. Equity swap
iii. Modification of terms
3. Explain briefly an asset swap.
a. It is the transfer by the debtor to the creditor of any asset, such as real estate,
inventory, receivables and investment, in full payment of an obligation. In Paragraph
3.3.3 provides that the difference between the carrying amount of the financial liability
and the consideration given shall be recognized in profit loss.
4. What is a dacion en pago?
a. It is when a mortgaged property is offered by the debtor in full settlement of the debt.
The transaction shall be accounted for as an “asset swap” form of debt restructuring.
This requires recognition of gain or loss based on the balance of the obligation including
accrued interest and other charges.
5. Explain the accounting procedure for a dacion en pago.
a. If the balance of the obligation including accrued interest and other charges is more
than the carrying amount of the property mortgaged, there is a gain on extinguishment
of the debt. Otherwise if the balance of the obligation is less than the carrying amount
of property mortgaged, there is a loss in extinguishment.
6. Explain brief an equity swap.
a. Is a transaction whereby a debtor and creditor may renegotiate the terms of a financial
liability with the result that the liability if fully or partially extinguished by the debtor
issuing equity instruments to be creditor. Simply stated, and equity swap is the issuance
of share capital by the debtor to the creditor in full or partial payment of an obligation.
7. Explain the initial measurement of the equity instruments issued in an equity swap.
a. IFRIC 19 provides that when equity instruments issued to extinguish all or part of the
financial liability are recognized initially, and entity shall measure the equity instruments
at the fair value of the equity instruments issued, unless that fair value cannot be
reliably measured.
8. Explain briefly modification of terms.
a. May involve either interest, maturity value or both. Interest concession may involve a
reduction of interest rate, forgiveness of unpaid interest or a moratorium on interest.
Maturity value concession may involve an extension of the maturity date or a reduction
of the principal amount.
9. Explain the accounting for substantial modification of terms.
a. Substantial modification of and existing financial liability shall be accounted for as an
extinguishment of the old financial liability an the recognition of new financial liability.
10. Explain the accounting for nonsubstantial modification of terms.
a. IASB recently clarified that any gain or loss on modification should be recognized in
profit or loss even if there’s no substantial modification of terms.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy