# ASC 470-50-40: Debt — Modifications and Extinguishments — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/50/#40-derecognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:3c94e2a6de0759464d7de08332061aa92216d9cd4ff4a98e433e5850c226c060 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-50-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/470/50/#40-derecognition) SEC content: no #### Extinguishments of Debt ##### [470-50-40-1](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:94a735d3712172cc71d037a919c8cbf6e8c31add0597a127f5192eb80db835a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [470-50-15-4](https://asc.understandingaccounting.org/asc/470/50/#470-50-15-4), the general guidance for the extinguishment of liabilities is contained in Subtopic 405-20 and defines transactions that the debtor shall recognize as an extinguishment of a liability. ##### [470-50-40-2](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:839d14c4f2d5fbdf896ba1599186a15f6512d9ee6bc8b4f2fb29f2f45edfa936 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A difference between the [reacquisition price of debt](https://asc.understandingaccounting.org/glossary/r/#reacquisition-price-of-debt "The amount paid on extinguishment, including a call premium and miscellaneous costs of reacquisition. If extinguishment is achieved by a direct exchange of new securities, the reacquisition price is the total present value of the new securities.") and the [net carrying amount of the extinguished debt](https://asc.understandingaccounting.org/glossary/n/#net-carrying-amount-of-debt "Net carrying amount of debt is the amount due at maturity, adjusted for unamortized premium, discount, and cost of issuance.") shall be recognized currently in income of the period of extinguishment as losses or gains and identified as a separate item. Gains and losses shall not be amortized to future periods. If upon extinguishment of debt the parties also exchange unstated (or stated) rights or privileges, the portion of the consideration exchanged allocable to such unstated (or stated) rights or privileges shall be given appropriate accounting recognition. Moreover, extinguishment transactions between related entities may be in essence capital transactions. ##### [470-50-40-2A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-2A) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:e64b0b51e3434e486d7c802c40db1eab442bab54dd472463826abbfc9db53f46 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In an early extinguishment of debt for which the fair value option has been elected in accordance with Subtopic 815-15 on embedded derivatives or Subtopic 825-10 on financial instruments, the net carrying amount of the extinguished debt shall be equal to its fair value at the reacquisition date. In accordance with paragraph [825-10-45-6](https://asc.understandingaccounting.org/asc/825/10/#825-10-45-6), upon extinguishment an entity shall include in net income the cumulative amount of the gain or loss previously recorded in other comprehensive income for the extinguished debt that resulted from changes in instrument-specific credit risk. ##### [470-50-40-3](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:01e547ca51ee7be4b3e1fe62c9980e122f85e3a976f6d030bfcb1fa714a8189b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In an early extinguishment of debt through exchange for common or preferred stock, the reacquisition price of the extinguished debt shall be determined by the value of the common or preferred stock issued or the value of the debt—whichever is more clearly evident. #### Extinguishment of Convertible Debt ##### [470-50-40-4](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:b66fca5662641b6e2c3c6467d3b0fc1ed99005f043618bc52282a25e2323c51a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The extinguishment of convertible debt does not change the character of the security as between debt and equity at that time. Therefore, a difference between the cash acquisition price of the debt and its net carrying amount shall be recognized currently in income in the period of extinguishment as losses or gains. ##### [470-50-40-5](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:5b6ac083e7c3f435a56b293b1d90d212be7877555d1b32795b3a6ae69649b681 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to debt tendered to exercise detachable warrants that were originally issued with that debt if the debt is permitted to be tendered towards the exercise price of the warrants under the terms of the securities at issuance. The tendering of the debt in such a case would be accounted for in the same manner as a conversion. #### Modifications and Exchanges ##### [470-50-40-6](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:9b95c8cfbfc2b551547e820804be5ff8d208308d126042e2eb8f2591ef57d735 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An exchange of debt instruments with substantially different terms is a debt extinguishment and shall be accounted for in accordance with paragraph [405-20-40-1](https://asc.understandingaccounting.org/asc/405/20/#405-20-40-1). A debtor could achieve the same economic effect as an exchange of a debt instrument by making a substantial modification of terms of an existing debt instrument. Accordingly, a substantial modification of terms shall be accounted for like an extinguishment. ##### [470-50-40-7](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:0751cc91e2bb2633fd2963c3e07f176da60db9d107158d259d3f731988a0ff03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transactions among debt holders do not result in a modification of the original debt's terms or an exchange of debt instruments between the debtor and the debt holders and do not impact the accounting by the debtor. ##### [470-50-40-8](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:059bc9ebaf1e62395ec8ba8abecff6170d276e20292339e699671c4c5871e7c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transactions involving the modification or exchange of debt instruments shall only result in gain or loss recognition by the debtor if the conditions for extinguishment of debt described in paragraph [405-20-40-1](https://asc.understandingaccounting.org/asc/405/20/#405-20-40-1) are satisfied or if the guidance in this Subtopic requires that accounting. ##### [470-50-40-9](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:ac2654addab48d0705edf24969f2754817313830961bf6bf84b1f623fb1c94d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor would only be accounted for as debt extinguishments if the debt instruments have substantially different terms, as defined in this Subtopic. ##### [470-50-40-10](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:953cc012f44044a6ea6cbaf7e03a28ae07302d354e6e63aaeff2a504888a6db3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. From the debtor's perspective, an exchange of debt instruments between or a modification of a debt instrument by a debtor and a creditor in a nontroubled debt situation is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different, except in the following two circumstances: 1. a A modification or an exchange affects the terms of an embedded conversion option, from which the change in the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is at least 10 percent of the carrying amount of the original debt instrument immediately before the modification or exchange. 2. b A modification or an exchange of debt instruments adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange. (For purposes of evaluating whether an embedded conversion option was substantive on the date it was added to or eliminated from a debt instrument, see paragraphs [470-20-40-7 through 40-9](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-7) .) ##### [470-50-40-11](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:0aa1dd2cdfc6939b5f5e40fd5c9d5403fb270a9f9e3927ef776daa69ddd03c10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. With respect to the conditions in (a) and (b) in the preceding paragraph, this guidance does not address modifications or exchanges of debt instruments in circumstances in which the embedded conversion option is separately accounted for as a derivative under Topic 815 before the modification, after the modification, or both before and after the modification. ##### [470-50-40-12](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:c4172d7921fbd8eb9fafa9a9ef90d8edfd43c600ce4edcb48e9c632c9b46a59a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following guidance shall be used to calculate the present value of the cash flows for purposes of applying the 10 percent cash flow test described in paragraph [470-50-40-10](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-10): 1. a The cash flows of the new debt instrument include all cash flows specified by the terms of the new debt instrument plus any amounts paid by the debtor to the creditor less any amounts received by the debtor from the creditor as part of the exchange or modification. For a modification or an exchange of a freestanding equity-classified written call option held by a creditor that is a part of or directly related to a modification or an exchange of an existing debt instrument held by that same creditor (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)), an entity shall apply the guidance in paragraph [470-50-40-12A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-12A). 2. b If the original debt instrument or the new debt instrument has a floating interest rate, then the variable rate in effect at the date of the exchange or modification shall be used to calculate the cash flows of the variable-rate instrument. 3. c If either the new debt instrument or the original debt instrument is callable or puttable, then separate cash flow analyses shall be performed assuming exercise and nonexercise of the call or put. The cash flow assumptions that generate the smaller change would be the basis for determining whether the 10 percent threshold is met. 4. d If the debt instruments contain contingent payment terms or unusual interest rate terms, judgment shall be used to determine the appropriate cash flows. 5. e The discount rate to be used to calculate the present value of the cash flows is the effective interest rate, for accounting purposes, of the original debt instrument. 6. f If within a year of the current transaction the debt has been exchanged or modified without being deemed to be substantially different, then the debt terms that existed a year ago shall be used to determine whether the current exchange or modification is substantially different. 7. g The change in the fair value of an embedded conversion option resulting from an exchange of debt instruments or a modification in the terms of an existing debt instrument shall not be included in the 10 percent cash flow test. Rather, a separate test shall be performed by comparing the change in the fair value of the embedded conversion option to the carrying amount of the original debt instrument immediately before the modification, as specified in paragraph [470-50-40-10(a)](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-10). ##### [470-50-40-12A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-12A) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:4576038cd6980ffc4c7c70e1cdaed15a9d6a33fe49ff47fb6d6cec209bcc421a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a modification or an exchange of a freestanding equity-classified written call option held by a creditor is a part of or directly related to a modification or an exchange of an existing debt instrument held by that same creditor (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)), an increase or a decrease in the fair value of the freestanding equity-classified written call option held by the creditor, calculated in accordance with paragraph [815-40-35-16](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-16), shall be included in the application of the 10 percent cash flow test described in paragraph [470-50-40-10](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-10). #### Subsequent Accounting for Modifications and Exchanges If Extinguishment Accounting Is Applied ##### [470-50-40-13](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:43fffb0cacfa13099928a89ab7243ea3948f0c405d47b9dcaddb5d9765d6b3c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is determined that the original and new debt instruments are substantially different, the new debt instrument shall be initially recorded at fair value, and that amount shall be used to determine the debt extinguishment gain or loss to be recognized and the effective rate of the new instrument. #### Subsequent Accounting for Modifications and Exchanges If Extinguishment Accounting Is Not Applied ##### [470-50-40-14](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:e81fa4f1e36c4f8aec1a01ba0d590ce09a00e13c54d0137717fd8f89485c363d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is determined that the original and new debt instruments are not substantially different, then a new effective interest rate shall be determined based on the carrying amount of the original debt instrument, adjusted for an increase (but not a decrease) in the fair value of an embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) resulting from the modification, and the revised cash flows. ##### [470-50-40-15](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:eb09ba22479ed9700a076634985a76812d46ad076c6339ce19dc400051ab91ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a convertible debt instrument is modified or exchanged in a transaction that is not accounted for as an extinguishment, an increase in the fair value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) shall reduce the carrying amount of the debt instrument (increasing a debt discount or reducing a debt premium) with a corresponding increase in additional paid-in capital. However, a decrease in the fair value of an embedded conversion option resulting from a modification or an exchange shall not be recognized. ##### [470-50-40-16](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:aa2efdb9e1dff55b8b006296e6162de6922e686cd598220987a328860154547b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). #### Fees between Debtor and Creditor ##### [470-50-40-17](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:db4da74207b567f2f4029fc71302ddf4ed87f6eb3d7264d1751d93147b1e234d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Fees paid by the debtor to the creditor or received by the debtor from the creditor (fees may be received by the debtor from the creditor to cancel a call option held by the debtor or to extend a no-call period) as part of the exchange or modification shall be accounted for as follows: 1. a If the exchange or modification is to be accounted for in the same manner as a debt extinguishment and the new debt instrument is initially recorded at fair value, then the fees paid or received shall be associated with the extinguishment of the old debt instrument and included in determining the debt extinguishment gain or loss to be recognized. 2. b If the exchange or modification is not to be accounted for in the same manner as a debt extinguishment, then the fees shall be associated with the replacement or modified debt instrument and, along with any existing unamortized premium or discount, amortized as an adjustment of interest expense over the remaining term of the replacement or modified debt instrument using the interest method. For fees between the debtor and creditor for exchanges of or modifications to line-of-credit or revolving-debt arrangements, see paragraph [470-50-40-21](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-21). ##### [470-50-40-17A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-17A) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:c581d0d28e6809d5be29b4b6fd2907f2fdec59fc02a0ed0d516395d1dee755f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An increase or a decrease in the fair value of a freestanding equity-classified written call option held by a creditor (calculated in accordance with paragraph [815-40-35-16](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-16)) that is modified or exchanged as a part of or is directly related to a modification or an exchange of a debt instrument held by that same creditor (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)) shall be accounted for in the same manner as fees between the debtor and the creditor as described in paragraph [470-50-40-17](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-17). #### Third-Party Costs of Exchange or Modification ##### [470-50-40-18](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:7c3f38545dd5fc814723601261fb82adc3a78d6ac699a293d518b47ba5c27516 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs incurred with third parties directly related to the exchange or modification (such as legal fees) shall be accounted for as follows: 1. a If the exchange or modification is to be accounted for in the same manner as a debt extinguishment and the new debt instrument is initially recorded at fair value, then the costs shall be associated with the new debt instrument and amortized over the term of the new debt instrument using the interest method in a manner similar to debt issue costs. 2. b If the exchange or modification is not to be accounted for in the same manner as a debt extinguishment, then the costs shall be expensed as incurred. For third-party costs for exchanges of or modifications to line-of-credit or revolving-debt arrangements, see paragraph [470-50-40-21](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-21). ##### [470-50-40-18A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-18A) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:efc1420c97f4ff8829caa98c12d7fe09b27197111a1973c52c259d0a0ecefdd3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An increase (but not a decrease) in the fair value of a freestanding equity-classified written call option held by a third party (calculated in accordance with paragraph [815-40-35-16](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-16)) that is modified or exchanged as a part of or is directly related to a modification or an exchange of a debt instrument (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)) shall be accounted for in the same manner as third-party costs incurred that are directly related to the modification or exchange of a debt instrument as described in paragraph [470-50-40-18](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-18). #### Transactions Involving Third-Party Intermediaries ##### [470-50-40-19](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:80943393d1c8b5f8e8d8442751c79686417dbef8ae92d01bc40a23d1457f98bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In transactions involving a third-party intermediary acting as agent on behalf of a debtor, the actions of the intermediary shall be viewed as those of the debtor in order to determine whether there has been an exchange of debt instruments or a modification of terms between a debtor and a creditor. Stated another way, if a third-party intermediary acts as agent, the analysis shall look through the intermediary. ##### [470-50-40-20](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:9d61459c54e663d8c37f336a52dcca4bd4b5c4f7bdbf74643b4ff7f73d97dd6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In transactions involving a third-party intermediary acting as principal, the intermediary should be viewed as a third-party creditor similar to any other creditor in order to determine whether there has been an exchange of debt instruments or a modification of terms between a debtor and a creditor. Stated another way, if a third-party intermediary acts as principal, the analysis should not look through the intermediary. #### Line-of-Credit or Revolving-Debt Arrangements ##### [470-50-40-21](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:0c44eb2c0138da5e3998b589458e8196a618e7837671f39b350d9dc06b40acaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Modifications to or exchanges of [line-of-credit or revolving-debt arrangements](https://asc.understandingaccounting.org/glossary/l/#line-of-credit-arrangement "A line-of-credit or revolving-debt arrangement is an agreement that provides the borrower with the option to make multiple borrowings up to a specified maximum amount, to repay portions of previous borrowings, and to then reborrow under the same contract. Line-of-credit and revolving-debt arrangements may include both amounts drawn by the debtor (a debt instrument) and a commitment by the creditor to make additional amounts available to the debtor under predefined terms (a loan commitment).") resulting in either a new line-of-credit or revolving-debt arrangement or resulting in a traditional term-debt arrangement shall be evaluated in the following manner: 1. a The debtor shall compare the product of the remaining term and the maximum available credit of the old arrangement (this product is referred to as the borrowing capacity) with the borrowing capacity of the new arrangement. 2. b If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then any unamortized deferred costs, any fees paid to the creditor, and any third-party costs incurred shall be associated with the new arrangement (that is, deferred and amortized over the term of the new arrangement). 3. c If the borrowing capacity of the new arrangement is less than the borrowing capacity of the old arrangement, then: 1. 1 Any fees paid to the creditor and any third-party costs incurred shall be associated with the new arrangement (that is, deferred and amortized over the term of the new arrangement). 2. 2 Any unamortized deferred costs relating to the old arrangement at the time of the change shall be written off in proportion to the decrease in borrowing capacity of the old arrangement. The remaining unamortized deferred costs relating to the old arrangement shall be deferred and amortized over the term of the new arrangement. - Fees between the debtor and the creditor include an increase or a decrease in the fair value of a freestanding equity-classified written call option held by a creditor (calculated in accordance with paragraph [815-40-35-16](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-16)) that is modified or exchanged as a part of or is directly related to a modification or an exchange of a line-of-credit or revolving-debt arrangement held by that same creditor (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)). Third-party costs include an increase (but not a decrease) in the fair value of a freestanding equity-classified written call option held by a third party (calculated in accordance with paragraph [815-40-35-16](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-16)) that is modified or exchanged as a part of or is directly related to a modification or an exchange of a line-of-credit or revolving-debt arrangement (see paragraphs [815-40-35-14 through 35-15](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-14) and [815-40-35-17(c)](https://asc.understandingaccounting.org/asc/815/40/#815-40-35-17)). - For fees between the debtor and the creditor or third-party costs not related to exchanges of or modifications to a line-of-credit or revolving-debt arrangements resulting in either a new line-of-credit or revolving-debt arrangement, see paragraphs [470-50-40-17 through 40-18A](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-17). ##### [470-50-40-22](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:2386015b58f2ee4931ac17f155e316d12dd29da2fdef9a79fae9734598af35cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic is limited to modifications to or exchanges of line-of-credit or revolving-debt arrangements by a debtor and a creditor (the same parties that were involved in the original line-of-credit or revolving-debt arrangement) in a nontroubled situation. ##### [470-50-40-23](https://asc.understandingaccounting.org/asc/470/50/#470-50-40-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:56.153Z to 2026-09-10T00:32:56.153Z Record version: sha256:7b1e3408f219fc0890e180b7bc71280d31576608da93a129e61622952dfb8d72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1 (paragraph [470-50-55-10](https://asc.understandingaccounting.org/asc/470/50/#470-50-55-10)) for an illustration of this guidance.