Data entry for PPP loans for C and S-Corporations. The new effective interest rate is then used to adjust the carrying value of the debt to the present value of the revised estimated cash flows, discounted at the new effective interest rate. Forgiven PPP loan proceeds are excluded from taxable income and are treated as tax-exempt income. Retrospective approach: A new effective interest rate is computed based on the original proceeds received, actual cash flows to date, and the revised estimate of remaining cash flows.Using this approach, the impact of the change in cash flows is recorded in the current period. Catch-up approach: The carrying value of the debt is adjusted to the present value of the revised estimated cash flows discounted at the original effective interest rate.Changes in cash flows from previous estimates are included in future interest expense on a prospective basis. Prospective approach: A new effective interest rate is computed based on the current carrying value of the debt and the revised estimated remaining cash flows.When the amount and timing of future cash flows change, one of the following methods should be applied:
In these instances, an entity must update the effective interest rate because the amount and timing of future cash flows has changed since the effective interest rate was established. For example, the prepayment may reduce the principal amount due at final maturity while the principal payments prior to maturity are not reduced at all. For example, if a reporting entity exercises an existing call option and repays 50% of the debt balance and all future principal payments of the debt are reduced by 50%, the reporting entity has extinguished 50% of the debt and should expense 50% of the unamortized costs. However, there are situations when an entity exercises an existing call option and repays a portion of the debt balance but all of the future principal payments are not reduced pro-rata.
There would be no change to the effective interest rate of the remaining debt. If a reporting entity extinguishes a portion of a debt instrument (e.g., exercises an existing prepayment option) and all future principal payments are reduced pro-rata by the percentage of debt paid down, the unamortized premium, discount, and debt issuance costs associated with the portion extinguished should be expensed the remaining unamortized debt issuance costs should continue to be deferred.
Transfers and servicing of financial assets Revenue from contracts with customers (ASC 606) Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) (d) In this restructure, the debt is retired by the transfer of real estate to. IFRS and US GAAP: Similarities and differences Business combinations and noncontrolling interestsĮquity method investments and joint ventures