Practical Accounting 1 Debt Structure

  1. 3 Types of Debt Structure
    • 1. Asset Swap
    • 2. Equity Swap
    • 3. Modification of Terms
  2. Asset Swap
    Current Value of Liability-Current Value of Fixed Asset = Gain or Loss
  3. Equity Swap
    3. Current Value of Liability - Fair Value of Shares or Fair Value of Liability = Gain or loss
  4. Modification of Terms
    ☞reduction of interest or principal or extension of the loan

    ☞extinguishment  of old liability and establish of new liability

    ☞new liability at PV based on orig interest rate

    CV of old liability-PV of new loan

    • -Gain/Loss at least 10% of the CV of liability
    • >10% ☞no substanstial modification

    no gains or losses; no extuinguishment; finally the old liability is continous
Card Set
Practical Accounting 1 Debt Structure
Debt Structure