This March 2023 edition incorporates guidance on the disclosure of supplier finance program obligations (ASU 2022-04), plus other new and updated interpretations. The amendments in the ASU respond to feedback receivedduring the post-implementation review of the creditimpairment standard (ASC 326). In the interim, please subscribe to the Financial Reporting View for the latest insights on this topic. Carry out therapeutic regimens such as behavior modification and personal development programs, under the supervision of special education instructors, psychologists, or speech-language pathologists. Entities that have adopted the credit impairment standard (ASC 326). All rights reserved. A reporting entity should also derecognize a debt instrument (and recognize a new one) when a debt modification or exchange is deemed an extinguishment. Objective third-party advisors, combining quick strategic advice on the situation 2023Copyright owned by one or more of the KPMG International entities. 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. september 15, 2017 61, 71, 82 and 90, as well as the Auditing Standards Board's proposal to expand its fraud standard which would substantially increase the need to . Partner, Dept. Partner, Dept. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Debt Restructuring Under IFRS 9: Changes You May Have Missed. Use our Accounting Research Online for financial reporting resources. Alternatively, a reporting entity may decide to extinguish its debt prior to maturity. Sec. Against that backdrop, the statement of cash flows is coming into the spotlight again. Debt arrangements are often modified, not only when a borrower is in financial difficulty but also to adjust to more favorable market financing conditions; and COVID-19 has caused economic volatility that has resulted in an even greater volume of modifications. This content outlines initial considerations meriting further consultation with life sciences organizations, healthcare organizations, clinicians, and legal advisors to explore feasibility and risks. 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. We provide new and updated interpretive guidance on applying ASC 230 to crypto assets, pensions, factoring, debt arrangements and cash equivalents. 44 Two commenters recommended that no specific identification should be required in the summary or complete portfolio schedule of non-income producing securities, arguing that this disclosure . 5. Partner, Dept. revise the effective interest rate of the debt). Step 2: Identify the performance obligations in the contract. Increased auditing standards, such as SAS Nos. share. Latest edition: Our in-depth consolidation guide, covering variable interest entities, voting interest entities and NCI. Improving business performance, turning risk and compliance into opportunities, developing strategies and enhancing value are at the core of what we do for leading organizations. use the outcome of the most likely scenario. Delivering insights to financial reporting professionals. Latest edition: KPMG explains accounting for share-based payments. Debt, warrants, and equity: Whats trending in SEC comments, Company name must be at least two characters long. NOTE: This course is currently being modified and updated for accounting standard updates. Receive timely updates on accounting and financial reporting topics from KPMG. If you did not attend the live webcast, but are interested in earning CPE credit for participating in this webcast, visitKPMGExecutive Education. This may be due to a number of reasons, including changes in interest rates, credit rating, or its capital needs. Appendix F provides a summary of the . Explore the topics at the Financial Reporting View. Recently, Ernst & Young sold its management-consulting business to Cap Gemini Group SA, a large and publicly traded computer services company headquartered in France. Welcome to Viewpoint, the new platform that replaces Inform. We walk you through available accounting options so that you can make the choice that is right for you. Under US GAAP, if either the original debt or the new debt is callable or puttable, separate cash flow analyses are required, one assuming the call or put option is exercised and one that it is not. 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. a partial prepayment), or both. Step 5: Recognize revenue when (or as) the entity satisfies a . 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. The first comprehensive accounting and reporting guidance on investments in debt and equity securities was issued in 1993. Step 3: Determine the transaction price. If an exchange of debt instruments or modification of terms is not accounted for as an extinguishment (i.e. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. If not, the accounting outcomes depend on whether the nontroubled modification is substantial, similar to IFRS Standards. Receive timely updates on accounting and financial reporting topics from KPMG. We intend to continue the dialogue updating our guidance to provide our insights on issues that arise. Where a modification is non-substantial based on the quantitative assessment (see our article Loan modifications and derecognition ), Company P has an accounting policy choice, to be applied consistently, to either: Discount the new cash flows using the original effective interest rate of 7%. In addition, current triggers for market change (e.g. By continuing to browse this site, you consent to the use of cookies. Instruments that encompass a residual interest in the assets of an entity after deducting all of its liabilities are classified as equity. Informing your decision-making. US GAAP TDR accounting does not exist under IFRS 9. Receive timely updates on accounting and financial reporting topics from KPMG. KPMG does not provide legal advice. Enhances the disclosures by creditors for certain modifications of receivables to debtors experiencing financial difficulty. 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Cash flows are classified as either operating, financing or investing activities depending on their nature. (only performed if the 10% quantitative test is not met). 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. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. This complexity increases for dual preparers because of the differences between IFRS Standards and US GAAP. In bringing this guidance together, we aim to help you effectively and efficiently identify the guidance that applies to different types of investments and understand the related accounting requirements. When the borrowing capacity increases or remains the same, all such fees or costs (including unamortized deferred costs as well as costs paid at the time of modification) are deferred and amortized over the term of the new arrangement. For guidance on assets acquired through an asset acquisition refer to PPE 2. Our in-depth guide comprises a collection of questions, issues and examples that we believe are relevant for companies thinking about the ways in which climate risk can affect their financial statements. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. SEC filers that are not eligible to be smaller reporting companies, Annual and interim periods in fiscal years beginning after Dec 15, 2019, Annual and interim periods in fiscal years beginning after Dec 15, 20221, All other entities, including not-for-profits and employee benefit plans, Permitted as of the beginning of the fiscal year, Permitted for an entity that has adopted ASU 2016-13 as of the beginning of the fiscal year. Partner, Dept. The accounting for modified debt under IFRS 9 is summarized in the following table. [AASB 9.B3.3.6A *] KPMG does not provide legal advice. Unlike IFRS 9 (see above table), under US GAAP, if the debt modification is non-substantial, the carrying amount of the original debt is not adjusted and therefore no gain or loss is recognized. We use cookies to personalize content and to provide you with an improved user experience. All rights reserved. Connect with us via webcast, podcast or in person/virtual at industry conferences. Sharing our expertise and perspective. Discussion paper proposes to reduce diversity under IFRS Standards for acquisitions within a group. Find out what KPMG can do for your business. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Measurement of the debt (i.e. Here we offer our latest thinking and top-of-mind resources. 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. A reporting entity may modify the terms of its outstanding debt by restructuring its terms or by exchanging one debt instrument for another. US GAAP contains prescriptive guidance on how to perform the 10% test. RSM Guide to accounting for debt modifications and restructurings alishan February 21, 2022 RSM US GAAP Publications, US GAAP For a variety of reasons, borrowers and lenders may renegotiate the terms of existing loans or exchange an existing loan for a new loan with the same lender. All rights reserved. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. Both IFRS Standards and US GAAP address debt modifications. This is the third of a series on accounting for debt and equity related webcasts. 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. All rights reserved. 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. Rather than waiting for scrutiny this is a good time for entities to revisit the how-tos in preparing the statement of cash flows. Provides an overview of the standard's concepts, descriptions of the procedures and an illustrative example of its application. KPMG Advisory Podcast Index page. 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. PwC. KPMG does not provide legal advice. Latest edition: Includes new and updated interpretations for ASC 842 and recent practice issues. Recognition of expected credit losses, writeoffs and recoveries, Methods to estimate expected credit losses and collective assessment, Historical loss experience, forecasts and reversion, Credit enhancements and practical expedients, Purchased financial assets with credit deterioration, Business combinations and asset acquisitions, Other investments in equity method investees, Specific considerations for insurance entities, commercial entities and trade receivables, Targeted changes foravailable-for-sale debt securities, Presentation, disclosure, effective date and transition. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Informing your decision-making. However, under US GAAP, the gating question is whether the modification is a troubled debt restructuring (TDR see difference #1 below). This Subtopic provides accounting and reporting guidance for debt (and certain preferred stock) with specific conversion features and other options as follows: Debt instruments with detachable warrants Convertible securitiesgeneral Beneficial conversion features Interest forfeiture Induced conversions 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. Software and SaaS industry overview. 1.1001-3. Modification or exchange of financial liabilities Do you have modifications or exchanges of fixed rate financial liabilities that do not result in derecognition? Using Q&As and examples, KPMG provides interpretive guidance on debt and equity financings. Interpretation of changing standards . The analysis that generates a smaller change in cash flows forms the basis for determining whether the 10% test is met. KPMGs guide provides interpretive guidance, including Q&As and illustrative examples, on the application of ASC 853. For affected institutions, the amendments compel advanced planning . Applicability Deal Advisory & Strategy (DAS) Technology, Media & Telecommunications (TMT) sector Lead, KPMG LLP. Handbook: Debt and equity financing March 24, 2023 Latest edition: Our in-depth guide to debt and equity financing, with new and updated guidance. Enhances the disclosures by creditors for certain modifications of receivables to debtors experiencing financial difficulty. Delivering insights to financial reporting professionals. [IFRS 9.3.3.2-3.3.3, 5.1.1, B3.3.6] Aasb 9.B3.3.6A * ] KPMG does not exist under IFRS 9: Changes you may Missed! 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