3.1 Overview of debt modification and extinguishment

A reporting entity may modify the terms of its outstanding debt by restructuring its terms or by exchanging one debt instrument for another. A debt modification may be accounted for as (1) the extinguishment of the existing debt and the issuance of new debt, or (2) a modification of the existing debt, depending on the extent of the changes.

Alternatively, a reporting entity may decide to extinguish its debt prior to maturity. This may be due to a number of reasons, including changes in interest rates, credit rating, or its capital needs.

This chapter discusses the accounting for debt modifications and exchanges, including:

Troubled debt restructurings (TDR)
Modifications or exchanges of term loans or debt securities
Modifications or exchanges of lines of credit or revolving-debt arrangements
Modifications or exchanges of loan syndications or participations

This chapter also discusses the accounting for debt defeasances and extinguishments.

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