Webcast: Statement of cash flows: Practical issues, Cash, cash equivalents and restricted cash, Securitization and other transfers of financial assets. Delivering insights to financial reporting professionals. Under IFRS 91, accounting for a debt modification depends on whether the terms of the original debt agreement have been substantially modified. of Professional Practice, KPMG US. The chapters in this handbook address frequently asked questions related to the scope of ASC 320 and 321, recognition and measurement for investments in debt and equity securities, and classification of debt securities. Provides an overview of the standard's concepts, descriptions of the procedures and an illustrative example of its application. The statement of cash flows is a central component of an entitys financial statements. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. This new KPMG guide compares the financial reporting implications of the CARES Act under IFRS to US GAAP. Partner, Dept. Publication date: 31 Dec 2022 us PP&E and other assets guide 1.1 This chapter focuses on property, plant, and equipment (PP&E) costs and provides guidance on cost capitalization, including what types of costs are capitalizable and when capitalization should begin. Both assessments may require significant judgment. Our in-depth guide has been updated to reflect those changes. Accordingly, we believe that modifications whose effect is included in the quantitative assessment, and that are not considered substantial based on that assessment, cannot generally be considered substantial on their own from a qualitative perspective. And for practical issues where the guidance remains unclear, we offer our position on how to classify many of these cash flows. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. For more detail about our structure please visithttps://kpmg.com/governance. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. Instead, the effective interest rate of the debt is recalculated so that the present value of the modified contractual cash flows equals its amortized cost. In this article, we discuss the main differences between the two sets of standards. Like IFRS 9, under US GAAP, the accounting for fees and costs incurred in a debt modification depends on whether the modification is substantial. Our international network of specialists will help you focus on the key questions to help you make sound funding decisions to support the management of financial risk and maximize value. This latest edition includes guidance on ASU 2022-02 (troubled debt restructurings and vintage disclosures), with new interpretations and examples based on experience with companies implementing ASC 326. We have created a thought leadership platform to help you address the ever-increasing and complex marketplace challenges and drive inorganic growth in a globally connected economy. Overview. More Tim Kolber tkolber@deloitte.com +1 203 563 2693 revise the effective interest rate of the debt). of Professional Practice, KPMG US. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Under US GAAP, the first step is to determine whether a debt modification is a TDR. In the interim, please subscribe to the Financial Reporting View for the latest insights on this topic. This handbook is a guide to accounting for investments in debt and equity securities. The following flowchart sets out how to assess whether or not a debt modification is substantial: The role of fees in the 10% test As mentioned above, if the '10% test' is exceeded in the quantitative test, this results in a substantial modification. Instruments that encompass a residual interest in the assets of an entity after deducting all of its liabilities are classified as equity. These remaining investments typically give the investor limited (if any) influence over the investee. Are you still working? Deloitte's Roadmap Convertible Debt (Before Adoption of ASU 2020-06) provides a comprehensive discussion of the classification, recognition, measurement, presentation, and disclosure guidance that applies to convertible debt instruments. In August, 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, resulting in the most substantial changes to this accounting standard in many years. Our Financial reporting developments (FRD) publication, Issuer's accounting for debt and equity financings (before the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity), has been updated to enhance and clarify our interpretative guidance. The University's total enrolments exceeded . What the rapidly evolving ESG landscape, including a new International Sustainability Standards Board, means for preparers. Reduction in impairment models For guidance on assets acquired through an asset acquisition refer to PPE 2. Informing your decision-making. See FG 3.4 for information on modifications and exchanges of term loans and debt securities, and FG 3.6 for information on modifications and exchanges of loan syndications and participations. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. These may include changes in principal amounts, maturities, interest rates, prepayment options and other contingent payment terms. Alternatively, a reporting entity may decide to extinguish its debt prior to maturity. Latest edition: KPMG explains accounting for share-based payments. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. * Use coupon code EARLY23SYMP by July 31, 2023 to save $100 off your registration. CPE eligible replays now available. Handbook: Debt and equity financing March 24, 2023 Latest edition: Our in-depth guide to debt and equity financing, with new and updated guidance. Informing your decision-making. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. If yes, TDR accounting is applied. Partner, Dept. Partner, Dept. 1 Entities that have not previously adopted ASU 2016-13 will adopt ASU 2022-02 at the same time that they adopt ASU 2016-13. All rights reserved. Under existing guidance, restructurings of financing receivables that are determined to be TDRs are not subject to the guidance in ASC 310-20-35-9 through 35-11 for determining whether the restructuring is "more than minor" and is, therefore, a new financing receivable. Latest edition: KPMG explains the accounting for income taxes in detail, providing examples and analysis. Latest edition: Our in-depth guide to accounting for acquisitions of businesses, updated for recent application issues. The modification adds or eliminates a substantive conversion option at the date of the modification. All rights reserved. Sharing our expertise and perspective. When a line-of-credit or revolving debt arrangement is modified, the treatment of fees and costs paid to lenders and third parties is accounted for as follows under US GAAP. Do the changes make a new or changed term loan substantially different from the old term loan? Latest edition: Includes new and updated interpretations for ASC 842 and recent practice issues. Our new guide explains the measurement and reporting of GHG emissions through the lens of the Greenhouse Gas Protocol. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Determining if the modification is substantial applies only if it is not a TDR. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Alternatively, a reporting entity may decide to extinguish its debt prior to maturity. For affected institutions, the amendments compel advanced planning . of Professional Practice, KPMG US, Executive Director, Dept. Modification or exchange of financial liabilities Do you have modifications or exchanges of fixed rate financial liabilities that do not result in derecognition? IFRS 9 has now been applicable for over a year, but some of its changes have often been either overseen or neglectedeven when they could have a material impact on the accounts. Applicability Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange Act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, {{favoriteList.country}} {{favoriteList.content}}, 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, 3.1Overviewof debt modification and extinguishment. 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