Debt restructurings and bankruptcy

Accounting, tax and FAS 109 considerations

Current market conditions have precipitated efforts by companies, across industries and markets, to reduce or restructure their debt obligations. Lenders also are experiencing difficulties, which creates pressure on the ability to negotiate debt covenant waivers or modify obligations. In the most troubled circumstances companies may plan for a bankruptcy filing.

The transactions and events occurring in these settings can have significant and sometimes unique financial reporting consequences. At the same time, efforts by the U.S. government to provide economic stimulus and foster liquidity include a number of federal tax law changes and proposals affecting these types of transactions.

This paper provides an overview of these transactions and events from both a financial reporting and income tax perspective.

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