The guidance in this Subtopic applies to all debtors.
The guidance in this Subtopic applies to all
troubled debt restructurings by debtors.
The substance rather than the form of the payable shall govern. Payables that may be involved in troubled debt restructurings commonly result from borrowing of cash, or purchasing goods or services on credit. Examples are accounts payable, notes, debentures and bonds (whether those payables are secured or unsecured and whether they are convertible or nonconvertible), and related accrued interest, if any. Typically, each payable is negotiated separately, but sometimes two or more payables are negotiated together. For example, a debtor may negotiate with a group of creditors but sign separate debt instruments with each creditor. For purposes of this Subtopic, restructuring of each payable, including those negotiated and restructured jointly, shall be accounted for individually.
In this Subtopic, a receivable or a payable (collectively referred to as debt) represents a contractual right to receive money or a contractual obligation to pay money on demand or on fixed or determinable dates that is already included as an asset or a liability in the creditor's or debtor's balance sheet at the time of the restructuring.
A restructuring of a debt constitutes a troubled debt restructuring for purposes of this Subtopic 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.
Whatever the form of concession granted by the creditor to the debtor in a troubled debt restructuring, the creditor's objective is to make the best of a difficult situation. That is, the creditor expects to obtain more cash or other value from the debtor, or to increase the probability of receipt, by granting the concession than by not granting it.
In general, a debtor that can obtain funds from sources other than the existing creditor at market interest rates at or near those for nontroubled debt is not involved in a troubled debt restructuring. A debtor in a troubled debt restructuring can obtain funds from sources other than the existing creditor in the troubled debt restructuring, if at all, only at effective interest rates (based on market prices) so high that it cannot afford to pay them.
For further guidance on determining whether a modification or exchange is a troubled debt restructuring, see paragraphs
.
If a debtor concludes that the modification or exchange is not within the scope of this Subtopic, the debtor would apply the provisions of Subtopic 470-50.