Response To Client Request 2

“Recognition of an impairment loss and the recognition of a gain on the extinguishment of debt are separate events, and each event should be recognized in the period in which it occurs. The Board believes that the recognition of an impairment loss should be based on the measurement of the asset at its fair value and that the existence of nonrecourse debt should not influence that measurement.” (Statement 144, paragraph B34)

any other indebtedness or liability of the debtor to the secured party direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all future advances or loans which may be made at the option of the secured party.

redemption? The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units in a mutual fund. A redemption occurs, in a fixed income security at par or at a premium price, upon maturity or cancellation by the issuer. Redemptions occur with mutual funds, at the choice of the investor, however limitations by the issuer may exist, such as minimum holding periods.

Debt capital: borrowing someone else’s money to finance the business under the condition that the money plus accrued interest must be paid back in full by an agreed upon date in the future

In accordance ASC 470-50-40-21b Modifications to or exchanges of line-of-credit or revolving-debt arrangements resulting in either a new line-of-credit or revolving-debt arrangement or resulting in a traditional term-debt arrangement shall be evaluated in the following manner:“ If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then any unamortized deferred costs, any fees paid to the creditor, and any third-party costs incurred shall be associated with the new arrangement (that is, deferred and amortized over the term of the new arrangement.”

Source of payments: The petitioners claim liquidity and the ability to pay interest or principal on amount owed, but conclusive findings show the insufficiency to pay interest or principal balance. This factor supports the treatment of the advances as equity.

1. to preclude the company from trading out of its temporary insolvency, thus resulting in creditors not being fully paid in respect of their debt; and

A restructuring of debt constitutes a troubled debt restructuring… if the creditor for economic or legal

Item *P14-12 *P14-13 *P14-14 Description Debtor/creditor entries for continuation of troubled debt. Restructure of note under different circumstances. Debtor/creditor entries for continuation of troubled debt with new effective-interest. Bond theory: balance sheet presentations, interest rate, premium. Various long-term liability conceptual issues. Bond theory: price, presentation, and retirement. Bond theory: amortization and gain or loss recognition. Off-balance-sheet financing. Bond issue, ethics Level of Difficulty Moderate Moderate Complex Time (minutes) 15–25 30–45 40–50

In the last ten years, there have been a variety of proposals which, unfortunately, usually reflect only the special interests of the groups proposing them. Generally speaking, these solutions fall into three categories: repudiation, minor adjustments in repayments, or reduction. A report “Relief

7-1 “Debt includes all borrowing incurred by a firm, including bonds, and is repaid according to a fixed schedule of payments and Equity consists of funds provided by firm’s owners, and the stock(pg272).”

the borrower is, or will be, unable to meet their obligations under the credit contract; and

to the extent that the charge relates to "circulating assets" where the grantor is a company, some unsecured creditors will take priority in respect to the realisation of the proceeds of these assets.

All entities that hold financial assets or commitments to extend credit that are not accounted for at fair value through profit or loss

A finding of insolvency is imperative, as particular rights are empowered for the creditor to exercise against the insolvent individual or organization. For example, exceptional debts may be paid off by dissolving assets of the insolvent party. Prior to proceedings, it is common for the insolvent entity to meet with the creditor in order to attempt to arrange a substitutable payment method.