How to Record Non-Substantial Debt Modification
Accounting for lender fees paid during a debt modification that does not meet the criteria for debt extinguishment.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Unamortized Debt Discount/Costs | Debit | 5,000.00 | - |
| Cash | Credit | - | 5,000.00 |
💡 Accountant's Note
Under ASC 470-50, if a modification is not substantial, lender fees are capitalized and amortized over the remaining term of the modified debt.
Practitioner & Systems Framework
💻 ERP Architecture
Update the effective interest rate in the debt module to reflect the new carrying amount.
⚠️ Audit Flags
Perform the 10% cash flow test to ensure the modification is not an extinguishment.
📄 Required Documentation
Modified loan agreement and the 10% test worksheet.
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