Banking
Debt-to-Equity Swap — NPL Converted to Shares
Converting a large non-performing corporate loan into equity shares of the borrower company.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Equity Investment (FVTPL — Converted Loan) | Asset (+) | 5,000,000.00 | - |
| Allowance for ECL (Released) | Contra-Asset (-) | 3,000,000.00 | - |
| Corporate Loans (NPL — Extinguished) | Asset (-) | - | 8,000,000.00 |
💡 Accountant's Note
Debt-equity swaps are an NPL workout strategy. The loan is extinguished and equity is received at fair value. The difference versus the net book value of the loan (after provisions) is a further gain or loss.
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