Session 11 - Session11: HyeSunChang ACCY303...

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Session 11: Financial Liabilities Hye Sun Chang ACCY 303  
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Learning Objectives Learning Objectives 1. Explain the accounting for troubled  debt restructuring.
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TDR: Charter Communication  TDR: Charter Communication  • Started by Microsoft Corp. co-founder Paul Allen • The nation's fourth-largest cable-TV company • Provides cable-TV, broadband and phone services  in 27 states • Grew rapidly through a series of debt-financed  acquisitions, and then went public in 1999. • Feb 12 2009, Charter Communication announced  it would seek bankruptcy-court protection by  April 1
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Hypothetically:  Hypothetically:  Charter Communication Inc. has a total outstanding debt  of $300,000.  The debt was borrowed at par value from First Credit  Bank on Jan 1 st , 2005 in the form of a 10% interest-bearing  note with maturity date December 31, 2009.  Prior to 2009, Charter Communication Inc. has always  paid the annual interest when due on December 31.  However, the company has experienced a severe net cash  outflow for the last several months and is unable to meet  the terms of the debt at December 31, 2008.
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TDR: Charter Communication TDR: Charter Communication On Jan 1 st  2009,  shareholders of Charter Communication  Inc. proposed a plan to First Credit to restructure the  $300,000 debt.  If First Credit does not accept the restructuring plan,  Charter Communication Inc. would be forced into  liquidation.  The total book value of Charter Communication’s asset is  $450,000 . However the estimated liquidation value (after 
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Session 11 - Session11: HyeSunChang ACCY303...

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