What types of assets change be exchanged in a trouble debt restructuring settlement?
From the debtor’s perspective, they can really offer up and type of asset. It is up to the creditor to decide if they want to accept the asset in exchange for the extinguishment of the debt. The most common types of assets transferred include tangible assets (building, property, land), intangible assets (trademarks, patents, etc.) or equity in the company (i.e. stock or shares of debtor).
You might also be interested in...
What is the journal entry to record a settlement related to troubled debt restructuring (TDR)?
There is not straightforward answer here as it depends on the type of asset that is transferred in a settlement. In addition, the journal entry would be different for the creditor and debtor. In the example below, Silicon Bank is the creditor and Slappy Ventures is the debtor. The debtor is transferring a building to […]
What does “TDR” stand for in accounting?
“TDR” stands for troubled debt restructuring. This occurs when a debtor (borrow) either settles or modifies the terms with a creditor (lender). The timeline below helps you understand the series of events that lead to a TDR.
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 […]