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require that those
circumstances exist. Companies may only elect the
fair value option when
1. 2. When a group of financial
assets or liabilities is
managed and its performance
is evaluated on a fair value
If the fair value option
mismatch.” Appendix 14B
Troubled Debt Restructuring
When changing the original terms of a debt agreement is
motivated by financial difficulties experienced by the debtor
(borrower), the new arrangement is referred to as a
troubled debt restructuring.
A troubled debt restructuring may be achieved in either of
1.The debt may be settled at the time of the restructuring.
2.The debt may be continued, but with modified terms. 14-35 14-36 Debt Settled at Time of Restructuring
First Prudent Bank is holding a $30,000,000 note from the developer of
some property. The developer is in financial trouble and cannot pay the
bank the amount owed. The bank agrees to accept property with a fair
value of $20,000,000 in full settlement of the note. The property is
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This note was uploaded on 11/19/2013 for the course ACCOUNTING 3100 taught by Professor He during the Fall '10 term at CUNY Baruch.
- Fall '10