# ASC 470-50-05: Debt — Modifications and Extinguishments — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/470/50/#05-overview-and-background)

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## ASC 470-50-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/470/50/#05-overview-and-background)

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##### [470-50-05-1](https://asc.understandingaccounting.org/asc/470/50/#470-50-05-1)

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This Subtopic discusses the accounting for all extinguishments of debt instruments, except debt that is extinguished through a [troubled debt restructuring](https://asc.understandingaccounting.org/glossary/t/#troubled-debt-restructuring "A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.")(see Subtopic 470-60) or a conversion of debt to equity securities of the debtor pursuant to conversion privileges provided in terms of the debt at issuance (see Subtopic 470-20).

##### [470-50-05-2](https://asc.understandingaccounting.org/asc/470/50/#470-50-05-2)

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This Subtopic also provides guidance on whether an exchange of debt instruments with the same creditor constitutes an extinguishment and whether a modification of a debt instrument should be accounted for in the same manner as an extinguishment.

##### [470-50-05-3](https://asc.understandingaccounting.org/asc/470/50/#470-50-05-3)

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In circumstances where an exchange of debt instruments or a modification of a debt instrument does not result in extinguishment accounting, this Subtopic provides guidance on the appropriate accounting treatment.

##### [470-50-05-4](https://asc.understandingaccounting.org/asc/470/50/#470-50-05-4)

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When debtors undergo a modification or exchange of a debt instrument, the resulting cash flows can be affected by changes in principal amounts, interest rates, or maturity. They can also be affected by fees exchanged between the debtor and creditor to effect changes in any of the following:

1.  a
    
    Recourse or nonrecourse features
    
2.  b
    
    Priority of the obligation
    
3.  c
    
    Collateralized (including changes in collateral) or noncollateralized features
    
4.  d
    
    Debt covenants or waivers
    
5.  e
    
    The guarantor (or elimination of the guarantor)
    
6.  f
    
    Option features.