On new guidelines to modify terms of a debt under the debt restructuring process

Paper Network:

Abstract: In February 2006, the Ministry of Finance issued a re-revised <<Accounting Standards for Enterprises - Debt Restructurings>>, the new guidelines on the accounting treatment of debt restructuring made a more detailed provisions, this article focuses on the new guidelines to modify other terms of a debt accounting treatment of debt restructuring to explore in order to accurately understand the new guidelines.

Keywords: new guidelines debt debt restructuring debt restructuring conditions of the new guidelines is defined as: 'the debtor's financial difficulties, creditors in accordance with its agreement with the debtor or the court's decision to make concessions on matters.' Concrete ways, including: to assets, debt, debt to capital, and modify other terms of a debt more than the combination of three ways, etc. The following guidelines on the amendments to the new conditions of debt restructuring other debt accounting treatment for detail.

First, modify the contents of the other terms of a debt change in accounting practice operating in specific conditions, including reduction in debt principal, interest exemptions, lower interest rates, extend the deadlines. Modify other conditions of debt and debt claims remain. To modify the terms of other debt debt restructuring, the debtor and creditors should be attached to or are not qualified or conditional, and two cases deal with:
Or conditional, generally refers to lower interest rates. Such as the original interest rate is 5%, then dropped to 3%, then often a condition attached, such as debt restructuring, a year after the debtor's profits, the interest rate back to 5% not profit continues to be 3%. in the debt restructuring does not know whether the debtor will be profitable next year, this condition is that the additional conditions of uncertainty, then this condition is or conditional. if the interest rate directly from the 5 % to 3%, that is not attached or conditional debt restructuring. is not attached or conditional exemption of interest include debt restructuring, reducing principal, to extend the deadlines.
Second, the accounting treatment of 1, not attached to or conditional debt restructuring (including exempt interest, reduce principal, to extend the deadlines for such cases, debtors and creditors in debt restructuring will create new accounts payable - debt restructuring and should be receivables - debt restructuring for new debt and creditors, debtors and creditors should be measured at fair value-based. restructured debt and the fair value of debt is a means of future cash flows discounted at the effective interest rate, discount as the present value is the fair value.

(A debtor shall be the fair value of the restructured debt as the recorded value of new debt. Basic entries:
By: Accounts payable - before the reorganization (the book value of debt before the reorganization Credit: Accounts payable - after the reorganization (the fair value of the restructured debt-operating income - debt restructuring gains (2) the creditor's debt should be restructured fair value recorded as new claims value basic entries:
By: Accounts receivable - after the reorganization (the fair value of the restructured debt operating expenses - debt restructuring loss (or credit impairment losses)
Bad debts Credit: Accounts receivable - prior to the Reorganization [patients] B. Bank 20 * 9-year due December 31, carrying a loan balance of 10.7 million yuan, of which, of $ 700,000 accrued interest receivable, loans 7% per annum due to a loss of the company year after year, cash flow difficulties and can not pay should be 20 * 9-year December 31, maturing loans, by mutual agreement, at 2 * 10 years on January 1, debt restructuring. B Bank agreed to loan principal reduced 8 million yuan, removed all interest owed by the debtor, the interest rate from 7% to 5% (the real interest rate and debt maturity extended to 2 * 11 Dec 31 day, annual interest rate paid the debt agreement was signed group agreements from the date of implementation. B bank loans to the provision of 500,000 yuan loan impairment.

(1 A 2 * 10 Accounting Treatment Company on January 1, calculate the debt restructuring gains: 10 700000-8000000 = 2700000 (yuan By: Long-term loans - bank 10,700,000 B

Credit: Long-term borrowings - debt restructuring - Bank B 8000000

Operating income - profits 2.7 million debt restructuring

(2 B Bank Accounting Treatment

2 * 10 years on January 1, loss of debt restructuring: 10700 000-8000000-500000 = 2200000 (Yuan


By: Long-term loans - debt restructuring - a company + principal 8000000

Loan impairment 500000

Operating expenses - loss of 2.2 million debt restructuring
Credit: long-term loans - a company 10.7 million
(Note: 'Long-term loans' is a special banking account, the bank's asset class accounts. Credited to said assets to reduce long-term loans, debit assets that increase long-term loans. 'Loan impairment' is equivalent to general business 'bad debts'
2, with or conditional debt restructuring Links to free download http://eng.hi138.com

With or conditional debt restructuring refers to debt restructuring to cope with conditions attached or reorganization or the amount due, according to the future is a matter of the items and the expenditure incurred. Future events occur is uncertain. With or conditional debt restructuring, the debtor, to modify the terms of the debt after the debt restructuring, the revised terms of debt is involved or the balance due and payable or the amount of the line or matters relating to the obligation and the conditions expected the debtor or the remaining balance should be recognized as accrued liabilities. the book value of debt restructuring and reorganization of debt after the recorded value and the amount of projected liabilities and the difference between profits as debt restructuring, profit or loss.

Of creditors, to modify the terms of the debt after the debt restructuring, the revised terms of debt or receivable balances related to, or should not be receivable balances not included in the book value of the restructured debt.

Connected to the case, assumed to be attached to or conditional debt restructuring. Or conditional, if Company A 2 * 10 years of profit, then back to 2 * 11 7 per cent per annum, assuming 2 * 10 years a company is profitable.

A company (the debtor re-Day (2 * 10 years by January 1: Long-term borrowings 10,700,000

Credit: Long-term borrowings - debt restructuring 8000000

Projected liabilities 160,000

Operating income (down squeeze 2.54 million
2 * 10 Dec 30, entries above the entry point problem.

2 * 11 12 31, entry:


By: Finance costs 400 000

Accrued liabilities 160 000

Credit: bank deposits 560 000

Bank B: debt restructuring, the assets are expected to do without. Debt restructuring, and 2 * 10 at the end of the entries above questions.

References [1] Ministry of Finance: Accounting Standards [M]. Economic Science Press, 2006.

[2] Cheng Haiyan <<Accounting Standards for Enterprises - Debt Restructurings>> impact on listed companies, Sichuan accounting, 2001, in the paper for free download http://eng.hi138.com.

Links to free download http://eng.hi138.com

Debt Market Papers