Practical Accounting 1 Debt Structure

• 1. Asset Swap
• 2. Equity Swap
• 3. Modification of Terms

Current Value of Liability-Current Value of Fixed Asset = Gain or Loss

3. Current Value of Liability - Fair Value of Shares or Fair Value of Liability = Gain or loss

☞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