In a TDR settlement, what types of gains are recorded?
When the debtor and creditor agree to a “settlement”, then the debtor needs to record a gain on the debt and potentially a gain on the asset exchanged. The visual below outline the two types of gain that may need to be recorded by the debtor.
For example, Fluffy Bunny Ventures entered into a troubled debt restructuring agreement with National Bank. National agreed to accept land with a carrying amount of $75,000 and a fair value of $100,000 in exchange for a note with a carrying amount of $150,000.
As you can see below, Fluffy Bunny Ventures would record a total gain of $75,000.
Back To All Questions