TDRs
Before applying modification/extinguishment guidance, borrowers must first determine whether the transaction is this.
An exchange with the same lender and terms not substantially different results in this outcome.
What is modification accounting
In 2024, this body identified Debt Modifications and Extinguishments as a top priority.
What is the PCC
Under the “Potential Path Forward,” the model would require this accounting for any modification/exchange that changes timing or amount of cash flows (and the TDR model would be eliminated).
What is extinguishment accounting
Type of dog Debt Mods PTAs love
What is a dachshund?
A debt restructuring is a TDR only if both this condition and a lender concession are present.
What is the borrower experiencing “financial difficulty”
The current model evaluates “substantially different” using this test.
What is the 10% cash flow test
In 2025, this topic was identified by the PCC as a top priority.
What are TDRs
Stakeholders say this part of the framework is complex because you must work through it before applying the rest of the debt modification guidance.
What is the TDR guidance
In a borrower TDR assessment, the second required element is that the lender grants this (examples include reduced interest or principal forgiveness).
What is a concession
Under the proposed simplification for non-PBEs, they could measure new/modified debt at this amount
What is the notional amount (unless the effective interest rate differs from the stated rate because there are multiple units of account identified upon issuance or restructuring)
In Fall 2025, a working group was created to do 2 distinct things. Name 1
What is (1) identifying problems and (2) studying potential private company solutions/alternatives
The team identified this disclosure that changed the direction of potential paths forward significantly
What is the debt fair value disclosure required by 825-10-50-10 for all PBEs
If the answer is “Yes” to both “financial difficulty” and “concession,” borrowers apply this Subtopic.
What is Subtopic 470-60, Debt - Troubled Debt Restructurings by Debtors
If the modification/exchange is not a TDR, borrowers apply this Subtopic.
What is Subtopic 470-50, Debt—Modifications and Extinguishments
In March 2026, PCC members agreed to postpone further research until this happens
What is the FASB discussing the topic at a future meeting
A concern with eliminating/bypassing the TDR model is losing an explicit signal that the borrower is experiencing ____ unless replaced with targeted disclosures.
What is financial difficulty (or financial distress)
Stakeholders call out this counterintuitive TDR outcome: when undiscounted future payments are less than carrying amount, the effective rate resets to ___% and the borrower recognizes no future interest expense.
What is zero
Stakeholders cite extra burden because Subtopic 470-50 requires the 10% test on this basis
What is a creditor-by-creditor (lender-by-lender) basis
In the revised extinguishment approach, PBEs would measure new/modified debt at this amount.
What is fair value
Before our current potential path forward, what was one of the three potential path's we were considering presenting to the board?
What is (1) Simplified Extinguishment Model, (2) TDR Elimination, and (3) TDR Resequencing