TDRs
Before applying modification/extinguishment guidance, borrowers must first determine whether the transaction is this.
What is a troubled debt restructuring (TDR)?
An exchange with the same lender and terms not substantially different results in this outcome.
What is modification accounting?
What state are both Debt Mods PTAs from?
What is Texas?
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?
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?
What type of dog do the Debt Mods PTAs love the most
What is dachshund (will accept wiener dog too)?
Under the proposed simplification for non-PBEs, they could measure new/modified debt at this amount
What is the principal amount (unless the effective interest rate differs from the stated rate because there are multiple units of account identified upon issuance or restructuring)?
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?
In 2024, this topic was identified by the PCC as a top priority.
What are debt modifications/extinguishments?
In 2024, this body identified Debt Modifications and Extinguishments as a top priority.
What is the PCC?
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?
If the change to the loan is with a new lender which of the three accounting models applies?
What is Extinguishment accounting?
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?