Restructuring Debt Essay

One appreciates the recommendation of providing cultivation on restructuring debt to help the connection combat its recent fiscal troubles. Even though the comp whatsoever is in the process of reorganizing one believes this cultivation will help a participation in reportage the restructuring of debt. One will reserve information on the requirements of reporting debt on links, get downs, and capital leases. In performing this one will also provide the journal entries one would need to record to restructure the come withs debt along with a proportion of the debt for the companys current reporting.One will also provide valuable information on the companys postemployment benefits. Requirements for Reporting Debt semipermanent debts for a company argon present obligations that consist of presumable future sacrifices of economic benefit, which are not kick inable at heart a grade or within the operating cycle of the company (Kieso, Weygandt, & Warfield, 2007, p. 672). General ly long-term debt consists of three categories, which are bail bonds payable, notes payable, and capital leases.In financial reporting one of the most controversial areas is the reporting of long-term debt because this debt impacts the cash flows of a company (Kieso, Weygandt, & Warfield, 2007, p. 691). The reporting requirements of the debt essential be both substantive and informative to the investor. Some long-term debt such as bonds, notes, and another(prenominal)s may need approval by the board of directors and stockholders before a company acquires the debt. Most long-term debt a company acquires has certain ovenants or restrictions within its agreement. This helps protect both the lender and borrower. A company must disclose the features along with any covenants or restrictions in the agreement of long-term debt in the financial statements or in the notes of the financial statements. This is only if the information provides an investor a more complete understanding of the financial carriage of the company and the results of its operations (Kieso, Weygandt, & Warfield, 2007, p. 672).Bonds PayableBonds basically represent a contract of a promise to pay at a maturity date a sum of money plus a specify rate of periodic interest on the maturity amount. Bonds can be either secured or unsecured. Secured bonds suffer some pledge of collateral that backs up the bond. An example of this type of bonds is a mortgage bond secured by a claim on real estate (Kieso, Weygandt, & Warfield, 2007, p. 673). Unsecured bonds are bonds that do not excite any collateral attach to them. Most bonds carry a specific rate of interest whereas others are sold with an implied interest rate at a price reduction.One can convert some bonds into other securities. No matter what bond a company acquires the terms and conditions of the bond must be disclose along with the covenants or restrictions on the bond. A company must also disclose any invasion on the covenant or restrictio ns of the bond. In reporting bonds a company must report the bond at its face value of its expected future cash flows, which consists of interest and principal (Kieso, Weygandt, & Warfield, 2007, p. 675). The company amortizes any brush aside or premium of a bond over the life of the bond.This basically is reporting the bond at its face value less the unamortized tax deduction or plus the unamortized premium. General Accepted report Principles (GAAP) requires a company to use the effective- interest method in determining the amortization of a discount or premium of a bond. A company reports the portion of the bond that matures within a year (current portion) as a current obligation, and the remainder as a long-term liability on the equilibrize sheet. Notes Payable Notes payable are generally an amount of money a company borrows with a romissory note. Long-term notes are sympathetic and different from bonds in some ways.The similarity is notes payable also have laid maturity d ates and carry either a stated or implicit interest rate (Kieso, Weygandt, & Warfield, 2007, p. 685). The dissimilarity is notes payable are not easily tradable. A company reports notes payable in a similar fashion as it does bonds. In reporting a note payable a company records the note at its face value of its future interest and principal cash flows. The company amortizes any discount or premium of a note over its life.If a note has no-bearing interest rate the company should report the difference between the face value and the cash received as a discount on the note. This amount one amortizes over the life of the note to interest expense. Capital Leases A company may use capital leases to finance its acquisition of capital assets. In lease financing a company must met the criteria of the Financial Accounting Standards Board (FASB) on capital leases. In this a company must record both a liability, and a related asset on its balance sheet. In reporting capital lease a company repo rts the lease at its present value of the stripped-down lease payments.The company allocates these lease payments victimisation the effective interest method to interest expense. This allocation using the effective interest method reduces the lease liability of the company. A company regardless of the type of liability it has must report the interest rate, maturity date, current interest expense, and future interest and principles payments of the liability in its financial statements or notes. A company should also disclose any restrictions or covenants on these liabilities. In disclosing this debt a company should present the debt by major category.