The Financial Accounting Standards Board
(FASB) has issued amended guidance on troubled debt
The amendment clarifies which loan
modifications constitute troubled debt restructuring and aims to
assist creditors in determining whether a modification of the terms
of a receivable meets the criteria to be considered a troubled debt
restructuring, both for purposes of recording an impairment loss
and for disclosure of troubled debt restructurings.
FASB chairman Leslie Seidman said the board
made the amendments after increases in loan modifications caused by
the economic downturn led investors, regulators, and practitioners
to request clarification on what types of modifications should be
considered troubled debt restructurings for accounting and
“This update provides that guidance, resulting
in greater consistency and transparency in the reporting of these
transactions,” Seidman added.
The new guidance is effective for public
companies effective for interim and annual periods beginning on or
after from 15 June and applies retrospectively to restructurings
occurring on or after the beginning of the fiscal year of
For non-public entities, the amendments are
effective for interim and annual periods beginning on or after 15
December 2012. However, early application is permitted.