# ASC 470-60-35: Debt — Troubled Debt Restructurings by Debtors — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/60/#35-subsequent-measurement) 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): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:5b2a709815d2d45430b3dc2b8cfdbd6194e8ff90277e56b60bc53423d40a309e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-60-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/470/60/#35-subsequent-measurement) SEC content: no ##### [470-60-35-1](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:1c552c082afdd9980f378f3030e89ff67fbddac5792b7cb2225addddaed4571a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A debtor shall account for 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.") according to the type of the restructuring as prescribed in this Section. ##### [470-60-35-2](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:9c1322c6a508f955617d761d554482a153dfa6ac65503e85d40c356a393b3db2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A debtor that transfers its receivables from third parties, real estate, or other assets to a creditor to settle fully a payable shall recognize a gain on restructuring of payables. The gain shall be measured by the excess of the [carrying amount](https://asc.understandingaccounting.org/glossary/c/#carrying-amount "For a receivable, the face amount increased or decreased by applicable accrued interest and applicable unamortized premium, discount, finance charges, or issue costs and also an allowance for uncollectible amounts and other valuation accounts.For a payable, the face amount increased or decreased by applicable accrued interest and applicable unamortized premium, discount, finance charges, or issue costs") of the payable over 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 assets transferred to the creditor. However, while the guidance in this Subtopic indicates that the fair value of assets transferred or the fair value of an equity interest granted shall be used in accounting for a settlement of a payable in a troubled debt restructuring, that guidance is not intended to preclude using the fair value of the payable settled if more clearly evident than the fair value of the assets transferred or of the equity interest granted in a full settlement of a payable. However, in a partial settlement of a payable, the fair value of the assets transferred or of the equity interest granted shall be used in all cases to avoid the need to allocate the fair value of the payable between the part settled and the part still outstanding. ##### [470-60-35-3](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:e71707fec49fb4f5c5bebee4f39067edaf0c2a88625fe2ba80d06a17188c96a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A difference between the fair value and the carrying amount of assets transferred to a creditor to settle a payable is a gain or loss on transfer of assets. The carrying amount of a receivable encompasses not only unamortized premium, discount, acquisition costs, and the like but also an allowance for uncollectible amounts and other valuation accounts, if any. The debtor shall include that gain or loss in measuring net income for the period of transfer, reported as provided in Topic 220. A loss on transferring receivables to creditors may therefore have been wholly or partially recognized in measuring net income before the transfer and be wholly or partly a reduction of a valuation account rather than a gain or loss in measuring net income for the period of the transfer. ##### [470-60-35-4](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:5aff3f0f085dbbfd03012232fd7041b763343b81d44395cbe9d1bd5ff802d6a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A debtor that issues or otherwise grants an equity interest to a creditor to settle fully a payable shall account for the equity interest at its fair value. The difference between the fair value of the equity interest granted and the carrying amount of the payable settled shall be recognized as a gain on restructuring of payables. ##### [470-60-35-5](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:78f5bd9c3b2c001b61cb9434158877d22fc0a86e2842f732fa596d6a082189db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A debtor in a troubled debt restructuring involving only modification of terms of a payable—that is, not involving a transfer of assets or grant of an equity interest— shall account for the effects of the restructuring prospectively from the [time of restructuring](https://asc.understandingaccounting.org/glossary/t/#time-of-restructuring "Troubled debt restructurings may occur before, at, or after the stated maturity of debt, and time may elapse between the agreement, court order, and so forth, and the transfer of assets or equity interest, the effective date of new terms, or the occurrence of another event that constitutes consummation of the restructuring. The date of consummation is the time of the restructuring."), and shall not change the carrying amount of the payable at the time of the restructuring unless the carrying amount exceeds the total future cash payments specified by the new terms. Total future cash payments includes related accrued interest, if any, at the time of the restructuring that continues to be payable under the new terms. That is, the effects of changes in the amounts or timing (or both) of future cash payments designated as either interest or face amount shall be reflected in future periods. Interest expense shall be computed in a way such that a constant effective interest rate is applied to the carrying amount of the payable at the beginning of each period between restructuring and maturity (in substance the interest method prescribed by paragraphs [835-30-35-2](https://asc.understandingaccounting.org/asc/835/30/#835-30-35-2) and [835-30-35-4 through 35-5](https://asc.understandingaccounting.org/asc/835/30/#835-30-35-4) ). The new effective interest rate shall be the discount rate that equates the present value of the future cash payments specified by the new terms (excluding amounts contingently payable) with the carrying amount of the payable. ##### [470-60-35-6](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:866647473de3ab84bb60f99b085bf5b47851140db3837fec3247046881bcdd4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If, however, the total future cash payments specified by the new terms of a payable, including both payments designated as interest and those designated as face amount, are less than the carrying amount of the payable, the debtor shall reduce the carrying amount to an amount equal to the total future cash payments specified by the new terms and shall recognize a gain on restructuring of payables equal to the amount of the reduction. If the carrying amount of the payable comprises several accounts (for example, face amount, accrued interest, and unamortized premium, discount, finance charges, and issue costs) that are to be continued after the restructuring, some possibly being combined, the reduction in carrying amount may need to be allocated among the remaining accounts in proportion to the previous balances. Thereafter, all cash payments under the terms of the payable shall be accounted for as reductions of the carrying amount of the payable, and no interest expense shall be recognized on the payable for any period between the restructuring and maturity of the payable. The only exception is to recognize interest expense according to paragraph [470-60-35-10](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-10). However, the debtor may choose to carry the amount designated as face amount by the new terms in a separate account and adjust another account accordingly. ##### [470-60-35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:25b89a7d6a3ca4d9fa71cedb2015b22787fe5a5397929d7b0335c96361ccf322 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A debtor shall not recognize a gain on a restructured payable involving indeterminate future cash payments as long as the maximum total future cash payments may exceed the carrying amount of the payable. Amounts designated either as interest or as face amount by the new terms may be payable contingent on a specified event or circumstance (for example, the debtor may be required to pay specified amounts if its financial condition improves to a specified degree within a specified period). To determine whether the debtor shall recognize a gain according to the provisions of the preceding two paragraphs, those contingent amounts shall be included in the total future cash payments specified by the new terms to the extent necessary to prevent recognizing a gain at the time of restructuring that may be offset by future interest expense. Thus, the debtor shall apply paragraphs [450-30-25-1](https://asc.understandingaccounting.org/asc/450/30/#450-30-25-1) and [450-30-50-1](https://asc.understandingaccounting.org/asc/450/30/#450-30-50-1) in which probability of occurrence of a gain contingency is not a factor, and shall assume that contingent future payments will have to be paid. The same principle applies to amounts of future cash payments that must sometimes be estimated to apply the provisions of the preceding two paragraphs. For example, if the number of future interest payments is flexible because the face amount and accrued interest is payable on demand or becomes payable on demand, estimates of total future cash payments shall be based on the maximum number of periods possible under the restructured terms. ##### [470-60-35-8](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:14c9dcdf4546c892bb1b867c7548d378e2fa699358ec95d27dff0672431b767a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A troubled debt restructuring may involve partial settlement of a payable by the debtor's transferring assets or granting an equity interest (or both) to the creditor and modification of terms of the remaining payable. Even if the stated terms of the remaining payable, for example, the stated interest rate and the maturity date or dates, are not changed in connection with the transfer of assets or grant of an equity interest, the restructuring shall be accounted for as prescribed by this guidance. A debtor shall account for a troubled debt restructuring involving a partial settlement and a modification of terms as prescribed in paragraphs [470-60-35-5 through 35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-5) except that, first, assets transferred or an equity interest granted in that partial settlement shall be measured as prescribed in paragraphs [470-60-35-2](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-2) and [470-60-35-4](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-4), respectively, and the carrying amount of the payable shall be reduced by the total fair value of those assets or equity interest. If cash is paid in a partial settlement of a payable in a troubled debt restructuring, the carrying amount of the payable shall be reduced by the amount of cash paid. A difference between the fair value and the carrying amount of assets transferred to the creditor shall be recognized as a gain or loss on transfer of assets. No gain on restructuring of payables shall be recognized unless the remaining carrying amount of the payable exceeds the total future cash payments (including amounts contingently payable) specified by the terms of the debt remaining unsettled after the restructuring. Future interest expense, if any, shall be determined according to the provisions of paragraphs [470-60-35-5 through 35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-5) . ##### [470-60-35-9](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:2bfd9420580ac3b43e2ba5e3bb0731d5fb87beaa8ceddec9415869a316fd4760 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A troubled debt restructuring that is in substance a repossession or foreclosure by the creditor or other transfer of assets to the creditor shall be accounted for according to the provisions of the preceding paragraph and paragraphs [470-60-35-2 through 35-3](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-2) . ##### [470-60-35-10](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:09f5203d60951902f93e0ea6bf0db751ce42b1d7f815ce9a3b912a09c4aded3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a troubled debt restructuring involves amounts contingently payable, those contingent amounts shall be recognized as a payable and as interest expense in future periods in accordance with paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2). Thus, in general, interest expense for contingent payments shall be recognized in each period in which both of the following conditions exist: 1. a It is probable that a liability has been incurred. 2. b The amount of that liability can be reasonably estimated. Before recognizing a payable and interest expense for amounts contingently payable, however, accrual or payment of those amounts shall be deducted from the carrying amount of the restructured payable to the extent that contingent payments included in total future cash payments specified by the new terms prevented recognition of a gain at the time of restructuring (see paragraph [470-60-35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-7)). ##### [470-60-35-11](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:68d22ffe6e67b22ac47ffee31466d0e852dd7f1f5930f04bf158a0aaf44d40fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If amounts of future cash payments must be estimated to apply the provisions of paragraphs [470-60-35-5 through 35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-5) because future interest payments are expected to fluctuate—for example, the restructured terms may specify the stated interest rate to be the prime interest rate increased by a specified amount or proportion—estimates of maximum total future payments shall be based on the interest rate in effect at the time of the restructuring. Fluctuations in the effective interest rate after the restructuring from changes in the prime rate or other causes shall be accounted for as changes in estimates in the periods in which the changes occur. However, the accounting for those fluctuations shall not result in recognizing a gain on restructuring that may be offset by future cash payments (see the preceding paragraph and paragraph [470-60-35-7](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-7)). Rather, the carrying amount of the restructured payable shall remain unchanged, and future cash payments shall reduce the carrying amount until the time that any gain recognized cannot be offset by future cash payments. ##### [470-60-35-12](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:33:23.646Z to 2026-09-10T00:33:23.646Z Record version: sha256:764e6a62463e25914b74099ccb9c844a14bbcaac0f0a82af222129bb5d99d423 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Legal fees and other direct costs that a debtor incurs in granting an equity interest to a creditor in a troubled debt restructuring shall reduce the amount otherwise recorded for that equity interest according to paragraphs [470-60-35-4](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-4) and [470-60-35-8](https://asc.understandingaccounting.org/asc/470/60/#470-60-35-8). All other direct costs that a debtor incurs to effect a troubled debt restructuring shall be deducted in measuring gain on restructuring of payables or shall be included in expense for the period if no gain on restructuring is recognized.