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January 10, 1977
Vol. 57 No. 1
FASB Releases Draft on
Restructured Debt
... And Sets Hearing on Extractive Industries
The CPA Letter
A Semimonthly News Report Published by the AICPA
The Financial Accounting Standards Board recently released the long-awaited exposure draft of a proposed statement establishing standards of financial accounting and reporting by the debtor and creditor for a troubled debt restructuring. If adopted, the proposed statement would be effective for troubled debt restructurings occurring after June 30, 1977.
According to the document, a restructuring of debt constitutes a troubled debt restructuring “if the creditor is compelled by economic or legal considerations related to the debtor’s financial difficulties to grant relief to the debtor that cannot meet its obligations on the debt.”
The proposal also separates troubled debt restructurings into two broad classes: Those in which the debtor transfers receivables, real estate, or other assets to the creditor or otherwise grants an equity interest to the creditor to satisfy the creditor’s claim, and those in which the debt continues but the terms are modified to defer or reduce cash payments required to be made by the debtor.
The board emphasized that the accounting for troubled debt restructurings would conform to historical-cost-based accounting. Neither debtor nor creditor would be required to revalue restructured debt after the date of a troubled debt restructuring.
Comments are due by March 10. Copies of the exposure draft (up to a maximum of five) may be obtained gratis from the FASB, High Ridge Park, Stamford, Conn. 06905.
The FASB also has scheduled a public hearing in New York beginning March 30 on financial accounting and reporting issues related to the extractive industries. As a basis for the hearing, the board has issued a discussion memorandum covering 13 basic issues and 83 related questions. No conclusions are stated in the document.
Major issues addressed in the discussion memorandum include the following: Accounting for costs incurred in prospecting for, acquiring, exploring, and developing mineral reserves (such as full cost versus successful efforts accounting) ; defining and measuring mineral reserves for financial accounting and reporting purposes; interaction of percentage depletion with interperiod income tax allocation; financial statement disclosure of data unique to the extractive industries; transitional problems of new accounting standards; and accounting for mineral property conveyances and contracts, including joint operations.
Single copies of the 404-page discussion memorandum may be obtained gratis from the FASB, High Ridge Park, Stamford, Conn. 06905.
In a related matter, the Mortgage Bankers Association of America has supported private industry’s role in setting accounting standards by endorsing the FASB’s efforts. Roswald McMullen, chairman of MBAA’s accounting standards subcommittee, said attempts by the SEC “to dictate accounting standards for disclosure by public companies is another example of government usurping a role that properly belongs to the private sector.”
Object Description
| Title | CPA letter, 1977 |
| Author | American Institute of Certified Public Accountants |
| Subject |
Accounting -- Societies, etc. Accounting -- Periodicals |
| Date-Issued | 1977 |
| Source | Originally published by: American Institute of Certified Public Accountants |
| Rights | Copyright and permission to reprint held by: American Institute of Certified Public Accountants |
| Type | Text |
| Format | PDF page image with corrected OCR scanned at 400 dpi |
| Digital Publisher | University of Mississippi Library. Accounting Collection |
| Date-Digitally Created | 2012 |
| Language | eng |
| Identifier | cpa letter 1977 |
