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SFAS No.
13 Accounting
by Debtors and Creditors for Troubled Debt
Restructuring |
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 Status |
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Issued by
the Financial Accounting Standards Committee in Taiwan on June
1, 1988 |
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Summary |
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The purpose of this Statement is to establish the
standards for accounting treatments by |
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debtors and creditors for a troubled debt
restructuring. |
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Restructuring without contingent
payments (receipts)
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When the debtor transfers assets or
issues equity securities to the creditor to satisfy |
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fully or partially the debt, the
transaction will be accounted for as follows: |
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(a) The
debtor shall compare the book value of the debt satisfied with the
fair value of
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the assets or equity securities surrendered. The excess of the
former over the
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latter shall be reported as a gain from debt restructuring.
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(b) The
creditor shall record the assets or equity securities at their fair
value. If the
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book
value of the receivable satisfied is greater than the fair value of
the assets
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or equity securities, the excess shall be reported as a loss on
receivable
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restructuring.
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Regarding any modification of the
terms of the debt (receivable), if the total of the
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future cash payments (receipts) is
less than the book value of the debt (receivable) at |
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the time of restructuring, the
transaction will be accounted for as follows:
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(a) The
debtor shall reduce the book value of the debt to the amount of the
total
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future cash payments and shall report the difference as a gain from
debt
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restructuring.
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(b) The
creditor shall reduce the book value of the receivable to the amount
of the |
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total future cash receipts and report the difference as a loss on
receivable
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restructuring.
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Regarding any modification of the
terms of the debt (receivables), if the total of the
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future cash payments (receipts) is
greater than the book value of the debt (receivable)
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at the time of restructuring, the
debtor (creditor) shall recalculate the effective
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interest rate for reporting interest
expense (revenue) of the future periods. |
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Restructuring with contingent
payments (receipts)
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When modification of the terms of the
debt involves contingent payments after
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restructuring and the totals of the
future cash payments (including the contingent |
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payments) is greater than the book
value of the debt, the debtor shall not report any
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gin from debt restructuring; however,
the debtor shall exclude the contingent payments |
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from the recalculation of the effective
interest rate. The contingent payments shall be
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reported as interest expense when they
are made or become certain; however, they
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shall be reported as repayments of the
book value of the original debt, up to the |
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difference between the book value of
the debt and the total future cash payments |
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(excluding the contingent payments),
if the former is greater than the latter.
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When modification of the terms of the
debt involves contingent receipts after
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restructuring and the total of the
future cash receipts (excluding the contingent
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receipts) is less than the book value
of the receivable at the time of restructuring, the
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difference shall immediately be
accounted for as a loss on receivable restructuring.
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Interest receipts collected in the
future shall be reported as recovery of the book value
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of the original receivable, and any
contingent receipts shall be reported as interest
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income in the period of realization.
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If the realization of contingent
receipts is probable and the amount can be reasonably
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estimated, the creditor may include
the contingent receipts in the total future cash
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receipts for calculating the loss on
receivable restructuring. When the contingent
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receipts are realized, they shall be
accounted for, up to the amount reduced in the loss
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on receivable restructuring due to the
inclusion of the contingent receipts, as recovery
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of the book value of the original
receivable, and any remainder shall be reported as
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interest income.
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Classification of a
restructuring gain or loss
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A gain (loss) from debt (receivable)
restructuring will be reported as an extraordinary
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gain (loss) if material in amount.
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Disclosure
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The debtor who restructures a debt due
to financial difficulty shall disclose the following
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information in the footnotes to the
financial statements for the year or period of
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restructuring:
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(a) the
changes in the terms of the debt and the content of the settlement
of debt;
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(b) the
gross amount of gain from debt restructuring and the related income
tax
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effect;
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(c) the
gross amount of gain or loss from disposal of assets arising from
the transfer of
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assets
in the restructuring; and
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(d) matters
related to contingent payments.
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The creditor who restructures a
receivable due to the debtor’s financial difficulty shall
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disclose the following information in
the footnotes to the financial statements for the
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year or period of restructuring:
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(a) the
amount of the receivable before and after the restructuring;
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(b) the
gross amount of interest income for the period that would have been
reported
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without
the restructuring;
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(c) the
gross amount of interest income for the period that has been
reported with the
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restructuring;
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(d) the
amount and terms of commitments, if any, to lend additional funds to
the
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debtor.
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Effective
date
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This statement becomes effective for
financial statements for the fiscal year ending on
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or after December 31, 1988. |
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