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On the new accounting standards, the debt restructuring

Author: ZhangLi From: www.yourpaper.net Posted: 2009-06-01 01:19:44 Read:
papers Keywords: ASBE debt restructuring fair value
Abstract:
from debt restructuring accounting standards, an overview of the existing problems in the comparison of the old and new debt restructuring guidelines for the content of the new debt restructuring guidelines discuss debt restructuring, accounting standards, and to further improve the recommendations.

In the case of a highly competitive market, some companies may be due to poor management, or affected by adverse external factors, the decline in profitability or even operating losses, temporary shortage of funds, it is difficult to repay the debt. In this case, the debtor may be difficult to payment of debts, debt restructuring, so it was a way to resolve debt disputes. Strive further with the international accounting standards convergence, China's new accounting standards recognized income for corporate debt restructuring, recording mode, made a lot of changes to the measurement and disclosure.

old and new debt restructuring Accounting Standards Overview

Old criteria will be the definition of "debt restructuring" means creditors in accordance with the agreement reached with the debtor or court ruling agreed with the debtor to modify the terms of a debt matters ", the definition of the new guidelines for the case of the debtor's financial difficulty, creditors in accordance with the The agreement reached with the debtor or court ruled to make concessions on matters. "
Old and new definition of the biggest difference is: the old criteria that the modified terms of a debt, regardless of the creditors have no concessions are debt restructuring; new guidelines that, in the case of financial difficulties debtor, creditor concessions, can be defined as debt restructuring .

Second, the comparison of the old and new debt restructuring guidelines for the content

(a) the re-introduction of the "fair value" measurement attributes
Article VII of the old criteria "to modify other terms of a debt for debt restructuring, if the book value of the debt to be restructured and the book value is greater than the amount due in the future, the debtor should restructure the debt write-downs to the amounts payable in the future", the new guidelines be amended to "the debtor Article 10 of the old criteria shall modify the fair value of the debt in other debt conditions as the recorded value of the restructured debt; "non-cash assets to settle a debt, the creditor should be restructured book value as the transferee of the non-cash recorded value of the asset, the new standards be amended to "creditors transferee of non-cash assets should be accounted for at their fair value"; Article 11 of the old criteria "to the debt into capital to settle a debt, the creditor should be restructured the book value as the recorded value of the transferee of the shares, the new guidelines be amended to "the debt into capital the creditor shall be entitled to the fair value of the shares is recognized as an investment in debtor."
In fact, a fair value measurement basis has many advantages. Relative to historical cost information, fair value information more reflect the market for corporate assets or the overall value of the evaluation, can better balance the apparent agreement, and more relevant to help users of accounting information on the future to make reasonable predictions and the right decisions, especially in the case of inflation is conducive to corporate in-kind capital preservation.
the profit and loss approach (b) debt restructuring difference
The confirmation of the reorganization income, transfer income related assets. New debt restructuring guidelines to change the original guidelines "one size fits all", the original creditor concessions causes the debtor is exempted or less to repay liabilities included in capital surplus approach instead of the confirmation of the debt restructuring gains included in operating income , while recognizing that the asset transfer income. Including the following four scenarios: First, in cash debts, the debtor shall be the difference between the book value and the actual cash payment of the debt restructuring, is recognized as the debt restructuring profits through profit or loss; Second, non-cash assets in satisfaction debt, the debtor shall be the difference between the book value of debt restructuring and the transfer of non-cash assets fair value recognized as gains of debt restructuring, profit and loss. The difference between the fair value and book value of non-cash assets transferred is recognized as the transfer of assets through profit or loss: of non-cash assets as inventories should be used as a sales processing, in accordance with "Accounting Standards for Business Enterprises No. 14 - Income provisions, revenue is recognized at its fair value at the same time carried forward the corresponding costs; non-cash assets to fixed assets, intangible assets, the difference between the fair value and the book value, are included in non-operating income or operating expenses; non cash assets for the long-term equity investment, the difference between the fair value and book value are included in investment gains and losses; debt to capital, the debtor shall creditor gives up the debt and enjoy the total nominal value of the shares is recognized as share capital (or paid- between the capital), the fair value of the shares of total share capital (or paid-in capital) is recognized as capital surplus, the difference between the book value of debt restructuring and the total fair value of the shares, is recognized as the gains of debt restructuring included profit or loss; modify other terms of a debt, the recorded value of the debt of the book value of the debt to be restructured, reorganized and the difference between the estimated amount of liability and recognized as debt restructuring profits through profit or loss. This reform to achieve convergence with International Financial Reporting Standards, embodies the essence of the debt restructuring transactions.
(c) restructuring loss methodology changes
For the loss suffered by the creditor in the debt restructuring, the old and new guidelines articulated some differences, but in the treatment of Practice insignificant. New standard requires a "creditor should be the book balance of the debt to be restructured and the fair value of the assets of the transferee, the transfer of the fair value of the shares, or restructuring, the difference between the book value of the debt through profit or loss (loss of debt restructuring), creditors provision for impairment of debt, you should first write-downs for impairment of the difference between the impairment of the shortfall in the profit or loss. impairment of the balance remaining after the write-downs should be transferred back and credits current asset impairment losses. There are two changes: First, the old criteria, "the book value of the debt to be restructured" to the book balance of the debt to be restructured "; clearly defined impairment provision should be offset against the difference between the provision for impairment impairment of the shortfall in the meter profit or loss.
Debt restructuring occasional economic business, but their behavior is, after all, is caused by the creditors' claims have claims and in the day-to-day business activities, not as a non-operating activities. The theory circles tendentious think concession equivalent to a creditor on the debtor's donation behavior, so the debt restructuring loss should be included in operating expenses. Such a statement is a bit far-fetched. Always want to collect all principal and interest on schedule, to make concessions to the debtor, in fact, they had to do as a creditor, and therefore can not be considered a donation behavior. Since the companies will not justify the receivables directly credited to the "Impairment of assets" subjects or write-downs for bad debts in the current subjects, then the creditors in debt restructuring to make concessions part, and its essence is not being paid claims, shall be those of the above-mentioned practice of accounting.

Third, the new debt restructuring guidelines

(a) the fair value is difficult to really use
Since our current production factors market, money market and capital market is still in the establishment of sound, and the fair value is difficult to truly reflect the "fair", may affect the authenticity and reliability of corporate assets or the profit and loss account. In addition, the quality of accounting personnel in China is not high, and there are too many human factors is difficult to determine the fair value of non-cash assets and equity. So our current "national conditions" is not yet appropriate to adopt the fair value.
(b) operating profit space to expand
debt restructuring after profits through profit or loss, the listed company can be a profit. So the number of insolvent companies, once the debt in whole or partial exemption, the proceeds will be directly reflected in the income statement in the period in which they arise, may greatly improve the earnings per share.
(c) of the financial difficulties of the definition of
Of financial difficulties of the debtor, a prerequisite for debt restructuring. Financial difficulties, but how to define new standards did not express. Financial difficulty is to define specific financial indicators, the overall financial position of the enterprise defined? Financial difficulties of long-term difficulties faced, or short-term funding constraints enterprise grow too fast? Brought to practice many potential problems.
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