Topic 470 (Debt): Borrower’s Accounting for Debt Modifications
Educational Paper Purpose
The FASB staff developed these educational materials to provide stakeholders with a summary and overview of the application of the guidance in Subtopic 470-50, Debt—Modifications and Extinguishments, and Subtopic 470-60, Debt—Troubled Debt Restructurings by Debtors, for borrowers that modify outstanding debt arrangements. The FASB staff understands that many entities have not previously applied the guidance in Subtopics 470-50 and 470-60, but because of the effects of the Coronavirus Disease 2019 (COVID-19) pandemic, there may be increased modifications or exchanges of outstanding debt arrangements. The nature and extent of a debt modification will determine the accounting effects on an entity’s statement of operations and statement of financial condition, which could be materially different under the requirements in Subtopics 470-50 and 470-60. Consequently, entities will need to evaluate all facts and circumstances to ensure that the debt modification is appropriately accounted for.
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