CHP5-PPT-GUINTIBANO,Clarice I..pptx

8/19/2019 CHP5-PPT-GUINTIBANO,Clarice I..pptx

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CHAPTER 5ACCOUNTING FOR FINANCIALLYDISTRESSED CORPORATIONS


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A fnancially distressed

c!"any is ne#$% &'se a(ility t cntin)e e*istence isd)(t+)l,

-% T'at is in t'e "rcess + rer.ani/atin,

0% T'at is a rer.ani/ed c!"any,

1% T'at cnte!"lates r "lans li2)idatin, r

5% T'at is )nder li2)idatin%


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A fnancially distressed c!"any

!ay )nderta3e a#$% 4)asirer.ani/atin,

-% Tr)(led de(t restr)ct)rin., r

0% Li2)idatin


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4UASIREORGANI6ATION4)asirer.ani/atin is a"er!issi7e ()t nt !andatry"rced)re )nder 8'ic' a fnanciallydistressed entity restates its

acc)nts and esta(lis'es a +res'start in acc)ntin. sense%


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ILLUSTRATION 1:


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TROU9LED DE9T RESTRUCTURINGTr)(led de(t restr)ct)rin. is an

arran.e!ent in 8'ic' a creditr: +recn!ic r le.al reasns related t ade(tr;s fnancial di


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A TROU9LED DE9TRESTRUCTURING =AY 9E IN

THE FOR= OF#>$?ASSET S&AP

I+ an asset s8a": t'e de(tr trans+ers anncas' asset >real estate r t'er asset? t

t'e creditr in settle!ent + t'e lia(ility%


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ILLUSTRATION 2: CASE 1


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>-? E4UITY S&AP

In an e2)ity s8a": t'e de(tr iss)es its 8n s'ares + stc3 t t'ecreditr in settle!ent + its (li.atins% As !entined earlier: t'e +air

7al)e + t'e cnsideratin .i7en )" is less t'an t'e carryin. 7al)e +(li.atin


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CASE 2


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>0? =ODIFICATION OF TER=S

T'e !difcatin + ter!s !ay in7l7e t'einterest: t'e !at)rity 7al)e: r (t'% Interestcncessin !ay (e in t'e +r! + red)ctin +interest rate: "artial r +)ll cndnatin +

interest r a !ratri)! n "ay!ent +interest +r a s"ecifed "erid + ti!e%Cncessin n !at)rity 7al)e !ay incl)de"artial cndnatin + "rinci"al r ane*tensin + t'e !at)rity date%


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ILLUSTRATION 3


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STATE=ENT OF AFFAIRS

T'e state!ent + a@airs is in e@ect a state!ent +

"sitin +r! a 2)ittin. cncernB r a nn.in. cncernB "int + 7ie8% T'e assets arere"rted at t'eir esti!ated reali/a(le 7al)einstead + (3 7al)e%

T'e assets are nt classifed as c)rrent r

nnc)rrent: ()t re"rted as eit'er "led.ed 8it'certain creditrs r +ree and t')s a7aila(le t.eneral creditrs%


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ILLUSTRATION 4 (EXAMPLE OF STATEMENT OF AFFAIRS)


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FUNCTIONS SERED 9Y THESTATE=ENT OF AFFAIRS

T'e state!ent + a@airs 8ill assistcreditrs in deter!inin. )st 8'at "licys'all (e ad"ted r 8'at actins s'all (eta3en 8it' res"ect t t'e insl7ency%

Analysis + t'is sta!en 8ill 'el" t'e! tdecide 8'et'er an e*tensin + ti!e: ac!"sitin a.ree!ent: r s!e t'er+r! actin is in t'eir (est interests%


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DEFICIENCY STATE=ENTA defciency state!ent is )s)ally

"re"ared t acc!"any t'e state!ent +a@airs% It indicates t'e s)rce + t'edefciency t )nsec)red creditrs


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ILLUSTRATION 5


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CHP5-PPT-GUINTIBANO,Clarice I..pptx