Troubled Debt Restructuring Accounting: Determining When It Applies and When It Doesn’t
Banking regulators have approved a moratorium on reporting standards for loan modifications classified as troubled debt restructurings (TDRs). Although they have temporarily waived the need for TDR reporting, they have not eliminated the need for credit risk management, safety and soundness, and internal accounting for loan impairments, restructurings, and charge-offs.
Although TDR reporting is not currently required, you still need to determine when to account for borrower loan modifications as TDRs. GAAP TDR accounting provides a consistent method to recognize and document loan impairments. Future regulatory examinations and external audits will be lenient on decisions made to assist troubled borrowers, but they will still want proper internal documentation of loan restructurings that would otherwise require TDR reporting.
- What types of loan modification agreements will require TDR accounting?
- What are the initial and ongoing requirements for TDR accounting?
- When can you avoid TDR accounting?
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