Question

A debtor and a creditor have negotiated new terms on a note. how can you determine whether the restructuring is a troubled debt restructure?

Answer 1

A TDR or troubled debt restructuring is a debt restructuring in which a creditor, for financial or legal reasons connected to a debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. You will know it by if the present value of the restructured flows using the original interest rate is less than the book value of the debt at the date of the restructure.

Answer 2

If the present value of the restructured flows using the original interest rate is less than the book value of the debt at the date of the restructure.

Debt restructuring is a procedure that permits a private or open organization, or a sovereign substance confronting income issues and money related trouble to lessen and renegotiate its reprobate obligations to enhance or reestablish liquidity with the goal that it can proceed with its operations.