Debt Instruments, Carrying Value, and Restructuring Issues

This chapter covers debt accounting beyond basic liability recognition. FAR questions here often turn on carrying amount, amortization method, issuance costs, and what changes when debt terms are modified or financial stress develops.

In This Chapter

• Notes, Bonds, and Debt Issuance Costs covers the basic instruments and their setup.
• Debt Measurement, Discounts, Premiums, and Amortization explains how carrying value changes over time.
• Debt Covenant Breaches, Modifications, and Lender Concessions addresses covenant breaches, change-in-terms analysis, and distress scenarios.

How to Use This Chapter

• Read this chapter after current liabilities so debt is framed as a more complex liability class.
• Focus on what changes carrying value and interest expense.
• Return here whenever a FAR miss involves debt issuance, premium or discount amortization, covenant violations, or restructuring treatment.

In this section

• Notes, Bonds, and Debt Issuance Costs
  Explore the intricacies of notes payable, bonds payable, and debt issuance costs under U.S. GAAP—covering net vs. separate presentation, premium/discount amortization methods, and practical examples.
• Debt Measurement, Discounts, Premiums, and Amortization
  Discover how to recognize, measure, and account for bonds issued at discounts or premiums, and master key amortization methods for effective debt management and CPA exam success.
• Debt Covenant Breaches, Modifications, and Lender Concessions
  Understand how FAR handles covenant breaches, waiver timing, debt modifications versus extinguishments, and borrower-side concessionary restructurings.