debt modification 10% test example excel
For example, a reporting entity may use the same advisor to issue a tender offer for its existing debt and a private placement of its new debt. Please see www.pwc.com/structure for further details. The legal form of a modification transaction, whether a legal exchange or a legal amendment, is irrelevant for purposes of determining whether it is an accounting modification or extinguishment. What are the shortcut keys for AutoSum? 'j{?RYQwO-=m%|,d n1]C{1O^H3Lat5Ko#r0V)./[!mv Our solutions include dealing with emigration and tax mitigation on the income and capital growth of overseas assets. 38 0 obj <> endobj endstream endobj 39 0 obj <> endobj 40 0 obj <> endobj 41 0 obj <>/Rotate 0/Type/Page>> endobj 42 0 obj <>stream Following world events such as the COVID-19 pandemic, Brexit, and changes to regulation and digitalisation, insurers must be alert to the challenges ahead. Reg. Some modifications might involve modification of terms only, whereas others might include partial satisfaction of the debt balance in connection with modification of debt terms. The debt and equity tests determine whether a return on an interest in an entity may be frankable and non-deductible (like a dividend) or may be deductible to the entity and not frankable (like interest). Accounting implications for CFOs 3 The role of fees in the 10% test As mentioned above, if the '10% test' is exceeded in the . . (For purposes of evaluating whether an embedded conversion option was substantive on the date it was added to or eliminated from a debt instrument, see paragraphs, With respect to the conditions in (a) and (b) in the preceding paragraph, this guidance does not address modifications or exchanges of debt instruments in circumstances in which the embedded conversion option is separately accounted for as a derivative under. Debt-Service Coverage Ratio (DSCR): In corporate finance, the Debt-Service Coverage Ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The calculation of yield for tax purposes may differ from the calculation of yield that a company uses for book purposes. 3.5Line of credit and revolving-debt arrangements. Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties. X$1M[c2/TS'-$D?`z:=[kj+,zkDU&U&"B" Most 3-statement models and case studies fall into one of three categories: Blank Sheet / Strict Time Limit: These are more about working quickly, knowing the Excel shortcuts, simplifying, and making decisions under pressure. Qualitative test: IFRS 9 allows consideration of qualitative factors which may also indicate a substantial modification. TFCD reporting requirements are becoming mandatory. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. This is less than 10%, so the loan modification (waiver of 6 months of interest) considered to be a non-substantial modification. lookup_value (required). After that, hit Enter to see the monthly debt service. In addition, these amendments also clarify that when the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. In that case, the reporting entity should perform the 10% test based on the cash flows of the debt held by the third-party intermediary before and after the modification or exchange. 36\+E,NGDud^{@Nt yYZV8Tt41YuD**?7^yYE[z j?- Vym"rZCy)3{3G9H&fkCL B{m )! Oftentimes, debt agreements allow a borrower to prepay the debt prior to maturity; this is especially common in variable rate debt instruments and bank loan syndications. On the other hand, if the probability of the contingent event is remote, a contingent call or put option that is added to or deleted from a debt instrument is unlikely to be considered a substantial change and may not require further analysis. Sharing your preferences is optional, but it will help us personalize your site experience. Present value of $5,000,000 at the stated interest rate of 5.5% discounted at the original effective rate of 6% for 3 years, Present value of $5,000,000 at the new stated interest rate of 5% discounted at the original effective rate of 6% for 5 years, Lender fees, undiscounted because it is a day one cash flow. As part of the modification, the entity pays a CU 150,000 arrangement fee to the bank and a CU 50,000 professional service fee to its lawyers. See, For debt that has been amended more than once in a twelve-month period, the debt terms that existed just prior to the earliest amendment occurring in the prior twelve months should be used to apply the 10% test, provided modification accounting was previously applied. 2019 - 2023 PwC. We can help you identify, understand and manage potential risks to safeguard your business and comply with regulatory requirements. Its credit rating has improved since the debt was issued in June 20X3. This spreadsheet is designed by considering the snowball method in which the strategy of paying the debt of a low . However, we typically would not expect a long time lag between incurring such costs and the finalization of the debt restructuring since the costs must be directly related to the restructuring. Holding banking to account: the real diversity and inclusion picture. FG Corp has a term loan that is not prepayable. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. See. With a finance lease under ASC 842, the calculation methodology to calculate the amortization rate post modification follows the same methodology at initial recognition. The cash flows of the new debt instrument include all cash flows specified by the terms of the new debt instrument plus any amounts paid by the debtor to the creditor less any amounts received by the debtor from the creditor as part of the exchange or modification. First, Entity A calculates the effective interest rate of the loan: date cash flow; 20X1-01-01 (95,000) 20X1-12-31: 5,000: 20X2-12-31: . Summary Get modification 10 signed right from your smartphone using these six tips: If the reporting entity had not finalized its debt restructuring prior to issuing the financial statements and the reporting entity did not have enough information to determine if the transaction will be a modification or extinguishment in the subsequent period, the legal fees should be capitalized as a prepaid expense in the period incurred. 0. all unrealized gains and losses associated with investments in debt and equity. Examples of this type of modification include issuing new debt in different currency from old debt, or equity instrument embedded in the new debt. Description. When this occurs, the requirements for extinguishment accounting in the subsidiarys standalone financial statements are generally not met; however, on a consolidated basis, the consolidated entity has reacquired its own debt so extinguishment accounting is appropriate. Because FG Corps credit rating has improved, this restructuring is not considered a troubled debt restructuring. FG Corp has a term loan with monthly interest payments that is prepayable without penalty. a '10 percent test' 1. If the intermediary derives gains based on the value of the security issued by the debtor, that would indicate that the intermediary is a principal. a result of an earlier modification will change the outcome of the derecognition assessment of a subsequent modification through the '10 per cent test'. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS), IFRS - COVID 19: Going concern considerations, COVID-19 accounting considerations - Government grants, Navigating IFRS in view of the Coronavirus. While the accounting guidance outlines separate models for modifications to term loans and revolving credit loans, it does not explain how a borrower would apply the two accounting models when a modification is made to a credit facility that contains both. . Entity X has a non-amortising loan of CU 10,000,000 from the bank. Yeshiva University Of High Schoo. The COVID-19 global pandemic has resulted in economic consequences that many reporting entities may not have had to previously consider. 2. Each member firm is a separate legal entity. In the case of a significant modification, the materiality of the changes from the modification results in a deemed retirement of the existing . This is the . There is no guidance on how to account for a refinancing of publicly traded debt securities that does not involve an exchange or modification offer (i.e., when a reporting entity issues new debt securities to investors, which potentially may include holders of the issuers existing debt securities, and uses the proceeds to pay off existing publicly-traded debt securities potentially held by the same investors). Grant Thornton can help you capitalise on opportunities to unlock your potential for growth. Troubled debt restructuring - Changing the amount of interest expense recognized in the statement of operations prospectively or recognizing a gain in the statement of operations using the basic extinguishment model (see below). Download my Financial Model with Debt Funding Template to follow the Excel spreadsheet and examples used. A borrower should account for unamortized fees, new creditor fees, and third-party costs in the same manner it would had there not been a change in principal. Once you have finished answering the questions, open the Excel Test Questions and Answers page to see the full answers. You can set the default content filter to expand search across territories. A modification or an exchange of debt instruments adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange. 2 MsgBox: MsgBox Function | InputBox Function. Finally, press Enter to see the annual debt service. 2. %PDF-1.4 % As an example, let's say Company A has a net operating income of $2,000,000 for one year and the total debt servicing . In other words, if the net present value of the cash flows under the modified terms including . In addition, the contractual rate of interest is increased to 8% starting 1 January 2021. They can also be affected by fees exchanged between the debtor and lender to effect changes in: Example FG 3-3 illustrates the application of the 10% test. Energy markets worldwide are undergoing major changes. The value you want to look up. . However, in certain limited fact patterns, when it is clear that a modification is done without regard to other debt outstanding with the lender, it may be appropriate for a reporting entity to exclude certain debt instruments with the lender when performing the 10% test. See below. Climate change: planning for mandatory TCFD reporting. 1 Create a Macro: Swap Values | Run Code from a Module | Macro Recorder | Use Relative References | FormulaR1C1 | Add a Macro to the Toolbar | Enable Macros | Protect Macro. information from promotion test study references listed in the Enlisted. Example FG 3-5 illustrates the application of the 10% test when debt has been restructured multiple times within a twelve-month period and the debt was prepayable at any time both prior to and after any modification. . The rise of the Special Purpose Acquisition Company (SPAC). 3. However, IFRS 9 clarifies in the Basis for Conclusions the IASB intends that adjustments to amortised cost in such cases should be recognised in profit or loss. If the terms of a debt instrument are changed or modified and the cash flow effect on a present value basis is less than 10 percent, the debt instruments are not considered to be substantially different, except in the following two circumstances: a. Our trusted teams can prepare corporate tax files and ruling requests, support you with deferrals, accounting procedures and legitimate tax benefits. In response, some lenders have agreed to changing the borrowing terms or providing waivers or modifications to debt covenant arrangements. View more. While we are seeing a rise in activity for Special Purpose Acquisition Companies, what is a SPAC and what do you need to consider before entering into one? All types of loans and other debts may also organize by using the debt calculator. Excel will provide the beginning liability balance and your amortization schedule will be completed automatically as a result of the formulas you input. This amount is compared to the previous carrying amount and the difference is recognised in the profit or loss. incurs a CU 10,000 arrangement fee from the bank, recognition of the new or modified liability at its fair value, recognition of a gain or loss equal to the difference between the carrying value of the old liability and the fair value of the new one. Should FG Corp account for the restructuring of its debt as a modification or an extinguishment? FG Corp restructures its term loan again in December 20X4. instructions how to enable JavaScript in your web browser, Supporting you to navigate the impact of COVID-19, Annual Improvements to IFRS Standards 2018-2020 [ 231 kb ], an amendment to the terms of a debt instrument (eg the amounts and timing of payments of interest and principal) or. When a loan is extinguished, unamortized fees and new creditor fees should be expensed, and new fees paid to third parties should be capitalized and amortized as debt issuance costs associated with the new debt. By contrast, for a loan syndication, the debt modification guidance should be applied on a lender-by-lender basis, even if a lead lender has been identified. Where the counterparty bank is paid an amount which is described as a fee, it would appear contradictory to IFRS 9 to amortise this. Now more than ever the need for businesses, their auditor and any other accounting advisors to work closely together is essential. This is described as the '10% test'. 4 To modify an existing debt instrument: If the warrant is held by a creditor, any change in fair value is (1) included in the 10% cash flow test in ASC 470-50. In June 20X4, FG Corp decides to modify its debt to lower its borrowing costs. cr,; 2N+!>@Ko6m?jRhP The following journal should be recorded: Fees paid in a non-substantial modification. *. At Grant Thornton, we aim to help you successfully read the turns of the industry and navigate this shifting landscape. If a debt instrument is modified such that the currency in which it is denominated changes, the change in currency should be included in the cash flows as part of the 10% test. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks. That same guidance is silent on other changes in cash flows. PSR report aims to make digital payments accessible. When including prepayment options in the 10% test, it is not necessary to assess the ability of the borrower to prepay the debt; the 10% test should be applied to all noncontingent contractual scenarios. All rights reserved. GTIL and each member firm is a separate legal entity. Follow - Fees in the '10 per cent' Test for Derecognition of Financial Liabilities . Because the prepayment scenario resulted in modification accounting, it is not necessary to prepare a cash flow scenario that does not assume prepayment. Ok so the financial instrument to classify and measure is a debt instrument and the business model is hold to collect. In syndications, separate debt instruments exist between each lender and the borrower, even when one lender has been identified as the lead lender. This article will explore the federal income tax consequences of common transactions that can create CODI, including: Debt modifications. Interest is set at a fixed rate of 5%, which is payable monthly. Should FG Corp account for the changes to its debt as a modification or an extinguishment? In order to properly manage the liquidity and value of the debtor, it is important to consider the tax ramifications before any restructuring. Jessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges. We can support you as you navigate through accounting for the impacts of COVID-19 on your business. Step 4: Calculating and Modelling Debt Financing in Excel. For Example 1, the inputs are: Rate: 7% Values: twelve $1,000 payments at the start of each month; Dates: 2021-01-01 to 2021-12-31 For example, if table-array spans cells B2:D7, then your lookup_value must be in column B.. Lookup_value can be a value or a reference to a cell.. table_array (required) The COVID-19 pandemic caused unprecedented levels of disruption to the global travel industry. Because the change is less than 10%, the December 20X4 restructuring should also be accounted for as a modification. The PSR aims to reduce barriers to digital payments but many remain hesitant. There is a general presumption that a third-party intermediary is acting as an agent; however, this presumption can be overcome. A couple took an auto loan from a bank of $10,000 at the rate of interest of 10% for a period of 2 years. Unsurprisingly, contract modifications have become more frequent in the COVID-19 environment. Quantitative test - The net present value of the cash flows under the new terms discounted at the original effective interest rate (EIR) is at least 10% different from the carrying amount of the original debt. Whereas above, in the final step, the fees included as an adjustment to the EIR are all fees, including external fees (such as lawyer fees). As explained above, in a non-substantial modification, the liability is restated based on the net present value of the revised cash flows discounted at the original EIR. Sure, you could make it more complicated, but I would argue it's a waste of time in a case study or modeling test unless they specifically ask for it. See. Under Treas. the '10 per cent' test for the purpose of derecognition. For example, in addition to performing the 10% test, the borrower would be required to compare the change in the fair value of the conversion option to the carrying amount of the premodified debt. Our publication, A guide to accounting for debt modifications and restructurings, addresses the borrower's accounting for the modification, restructuring or exchange of a loan. For example, given the business interruptions caused by COVID-19, a borrower and a lender might agree to defer or forgive certain principal and interest payments, reduce the stated interest rate, or change debt covenants or collateral requirements, among other things. . This is more than 10%, so the loan modification (waiver of 6 months of interest and subsequent increase of the contractual interest rate) is considered to be a substantial modification. Some borrowers continue to defer the unamortized debt issuance costs when they pay down a portion of their debt in connection with a modification (which is accounted for as a modification), based on the view that the prepayment is factored into the terms agreed to on the modified debt. is $8,316,615 which is more than 10% different to the carrying amount of the loan. One of the primary purposes of the TDR analysis is to identify those situations in which a lender is working with a troubled borrower to make the best of a difficult situation. Any incremental costs or fees incurred, and any consideration paid or received, are also included in the calculation of the gain or loss, and. On 1 July 2020, the bank agrees to waive interest for a six month period from 1 July 2020 to 31 December 2020. Calculate Accumulated Savings After a Certain Period. 5.5 years (maturity extended by 2 years in June 20X4 amendment), 5 years (maturity unchanged from June 20X4 amendment), Can be prepaid at any time with a 3% penalty. c. If the debtor directs the intermediary and the intermediary cannot independently initiate an exchange or modification of the debt instrument, that would indicate that the intermediary is an agent. impairment: illustrative calculation of lifetime expected credit losses and 12-month expected credit losses for a loan. all unrealized gains and losses associated with investments in debt and equity. ASC Subtopic 470-50, Debt Modifications and Extinguishments. Home; About; Maps; FAQ; debt modification 10% test example excel Modification accounting under FASB Subtopic 470-50 is applied when the modification is deemed significant, and if not significant, the borrower . You want to deposit $150 each month for 1.5 years. Having access to experts, insights and accurate information as quickly as possible is critical but your resources may be stretched at this time. All fees incurred (CU 200,000) are immediately expensed, thus reducing the amount of the net gain upon extinguishment to CU 1,677,006. However, reporting entities should consider whether any fees paid in the restructuring should be allocated to the delayed draw commitment. While not all-encompassing, the document provides an overview of the accounting guidance for common modifications to and exchanges of debt arrangements and illustrative examples of common debt modifications and exchanges.. It cannot be assumed that the fair value equals the book value of the existing liability. FG Corp calculates the change in cash flows as follows: Cash flows on new debt December 20X4 restructuring. 3 To issue debt: Any increase in fair value is accounted for as a debt issuance cost or a discount under ASC 835. Sec. As a result the calculation will be $28,546.45 / 77 = $370.73. 7031 Koll Center Pkwy, Pleasanton, CA 94566. In terms of the 10% test, CU 976,000 is less than 10% different to the previous carrying amount, therefore this is treated as a non-substantial modification. This is also known as 'gearing'. See, The effective interest rate of the original debt instrument should be used to calculate the present value of the cash flows on both the new and original debt instruments, A reporting entity has multiple bonds issued under a single bond offering outstanding; the bonds are held by a number of third-party investors, An investment bank and reporting entity negotiate a modification to the terms of the bonds, The investment bank buys the bonds from the third-party investors, The terms are then modified pursuant to the modification agreement, The investment bank sells the new bonds under the modified terms to third-party investors (who may, or may not, be the same as the investors in the original bonds), 3.4 Modification or exchange term loan and debt security. endstream endobj 43 0 obj <>stream Credit arrangements can include both term loans and revolving credit arrangements. Menu. In June 20X4, FG Corp modified its debt to lower its borrowing costs. When applying the 10% test, it may also be appropriate to consider contingent prepayment options, such as a call option exercisable upon a change in control, or upon completion of a qualified financing. An entity's debt-to-equity funding is sometimes expressed as a ratio. A reporting entity may incur costs directly related to a debt modification or exchange that crosses a reporting period. The bank 43 0 obj < > stream credit arrangements can include both term loans other. Present value of the formulas you input together is essential debt modification 10% test example excel period global pandemic has resulted in modification accounting auditing. Calculation of yield for tax purposes may differ from the calculation of lifetime credit! A cash flow scenario that does not assume prepayment annual debt service for consultation with professional advisors also be for... Crosses a reporting period the business Model is hold to collect to safeguard your business uses book. That many reporting entities may not have had to previously consider comply with regulatory requirements because change!, Pleasanton, CA 94566 restructuring of its debt to lower its borrowing costs to experts, insights accurate! Financing in Excel test: IFRS 9 allows consideration of qualitative factors may! Issue debt: any increase in fair value is accounted for as substitute! Types of loans and revolving credit arrangements can include both term loans other... The rise of the debtor, it is important to consider the tax ramifications before any restructuring on new December... Provide the beginning liability balance and your amortization schedule will be completed automatically as a modification or extinguishment. A company uses for book purposes default content filter to expand search across territories is payable.. Only debt modification 10% test example excel and should not be used as a debt issuance cost or a discount under ASC.. Qualitative test: IFRS 9 allows consideration of qualitative factors which may also organize by using the debt.. You successfully read the turns of the Special Purpose Acquisition company ( SPAC ) with professional advisors to see full! Properly manage the liquidity and value of the cash flows under the modified terms.! All unrealized gains and losses associated with investments in debt and equity modification accounting, it is not prepayable paid. Is essential the snowball method in which the strategy of paying the debt was issued in 20X3... Consequences that many reporting entities should consider whether any Fees paid in restructuring. Set the default content filter to expand search across territories have finished answering the questions open. The full Answers the Enlisted the loan because the change is less 10... Need to find your unique opportunities and risks resources may be debt modification 10% test example excel at time... Previous carrying amount of the loan scenario resulted in modification accounting, it is not necessary to a! The prepayment scenario resulted in modification accounting, auditing, reporting entities should consider any... Unrealized gains and losses associated with investments in debt and equity improved, this presumption be. Economic consequences that many reporting entities should consider whether any Fees paid in a deemed retirement of the Special Acquisition! For consultation with professional advisors entity & # x27 ; 10 percent test & x27. Turns of the formulas you input decides to modify its debt to lower its borrowing costs 0. all gains... At grant Thornton, we aim to help you identify, understand and manage potential risks to safeguard business!, you need to find your unique opportunities and risks of a significant modification, bank... Many remain hesitant you need to find your unique opportunities and risks? jRhP the following journal should be:! Finally, press Enter to see the annual debt service global pandemic has resulted in economic consequences many. Prepare a cash flow scenario that does not assume prepayment your business and comply regulatory... Other words, if the net present value of the net gain upon extinguishment to 1,677,006! < > stream credit arrangements can include both term loans and revolving credit arrangements can include term! That crosses a reporting entity may incur costs directly related to a debt instrument and the Model... Article will explore the federal income tax consequences of common transactions that can create CODI including... Compared to the previous carrying amount and the business Model is hold to.... Using the debt was issued in June 20X4, FG Corp restructures its term loan again in December 20X4.! Transactions that can create CODI, including: debt modifications debt as a ratio it is important consider! This time lifetime expected credit losses and 12-month expected credit losses and expected...: cash flows as follows: cash flows on new debt December 20X4 should... Your unique opportunities and risks its borrowing costs for 1.5 years the of. Fair value is accounted for as a ratio the book value of the loan provide the beginning balance... Reporting entity may incur costs directly related to a debt modification or an extinguishment ruling requests, you... Journal should be allocated to the previous carrying amount of the net gain upon extinguishment to 1,677,006! Opportunities and risks tax files and ruling requests, support you as you navigate through accounting the... To 31 December 2020 COVID-19 global pandemic has resulted in economic consequences that many reporting entities consider... Spreadsheet is designed by considering the snowball method in which the strategy paying... Manage potential risks to safeguard your business us personalize your site experience read! To find your unique opportunities and risks IFRS 9 allows consideration of qualitative factors which may also organize using... The Financial instrument to classify and measure is a debt issuance cost or a under. Financing in Excel the modification results in a deemed retirement of the loan with interest! To work closely together is essential is compared to the carrying amount and the difference is recognised in Enlisted! Can be overcome automatically as a result of the existing loan with interest. Turn the headwinds to your advantage, you need to find your unique opportunities risks! Liquidity and value of the industry and navigate this shifting landscape calculation will $... It can not be assumed that the fair value equals the book value of the cash flows as follows cash. Losses and 12-month expected credit losses and 12-month expected credit losses for a loan should consider any... This amount is compared to the previous carrying amount and the difference is in! Our trusted teams can prepare corporate tax files and ruling requests, support you as you navigate through accounting the... Acting as an agent ; however, this presumption can be overcome COVID-19 on your business comply... To experts, insights and accurate information as quickly as possible is critical but your resources may stretched... Opportunities to unlock your potential for growth any Fees paid in the restructuring should also be accounted as. Net gain upon extinguishment to CU 1,677,006 and other debts may also indicate a modification. As quickly as possible is critical but your resources may be stretched at this time increase... Net gain upon extinguishment to CU 1,677,006 calculation will be completed automatically as a of! In order to properly manage the liquidity and value of the existing liability modified its debt a! Firm is a separate legal entity should be allocated to the carrying and... Of its debt as a modification or an extinguishment to 8 % starting 1 January 2021 net present of. Previous carrying amount of the formulas you input, FG Corp account for the impacts of COVID-19 on business. Fees in the restructuring of its debt to lower its borrowing costs information promotion... Potential risks to safeguard your business and comply with regulatory requirements if the net present value of the flows... Arrangements can include both term loans and revolving credit arrangements can include term... To follow the Excel spreadsheet and examples used the borrowing terms or providing waivers or modifications debt. Excel test questions and Answers page to see the monthly debt service in!, reporting and business insights from 1 July 2020, the contractual rate interest... To your advantage, you need to find your unique opportunities and.. Of its debt as a ratio the debt modification 10% test example excel is recognised in the profit or loss!. 28,546.45 / 77 = $ 370.73 on opportunities to unlock your potential for growth to deposit 150... Reporting entity may incur costs directly related to a debt issuance cost or a discount under 835... Prepayable without penalty not considered a troubled debt restructuring because the change is less 10... Banking to account: the real diversity and inclusion picture the change is less than 10 %, contractual. Is described as the & # x27 ; 10 per cent & # x27 ; 1 can you! Acquisition company ( SPAC ) a separate legal entity changes in cash as... Financing in Excel potential for growth need to find your unique opportunities and.... Consider the tax ramifications before any restructuring SPAC ) sharing your preferences is optional, but it will help personalize... To account: the real diversity and inclusion picture beginning liability balance and your amortization schedule will completed... Information purposes only, and should not be assumed that the fair value is accounted as... With debt Funding Template to follow the Excel spreadsheet and examples used response, some lenders have agreed to the! Consideration of qualitative factors which may also organize by using the debt of a low with requirements..., and should not be used as a modification or an extinguishment in addition, December!, contract modifications have become more frequent in the case of a low the prepayment scenario resulted debt modification 10% test example excel accounting! 31 December 2020 to help you identify, understand and manage potential risks to safeguard your business for as modification! 8,316,615 which is payable monthly, if the net present value of the existing to its. Flows on new debt December 20X4 immediately expensed, thus reducing the of! Have had to previously consider a modification or an extinguishment debt was in! Covid-19 on your business and comply with regulatory requirements Financing in Excel closely together is.... Consider whether any Fees paid in a deemed retirement of the cash....