Accounting for debt in uncertain times: 5 things to know

When companies experience temporary cash flow issues during uncertain times, the ability to repay debt may come into question. What should companies know when that happens? Listen as Heather Horn and  Suzanne Stephani discuss debt from a borrower’s perspective, covering key reminders on the accounting for covenant violations and debt restructurings. Topics include:0:37 - Overview. We begin by taking a look at the volume of corporate debt and why some worry about the potentially higher debt default rates.2:36 - Covenant violations. Suzanne explains what companies should think about if they are at risk of violating a covenant in their debt agreement.6:43 - Subjective acceleration clauses. What are subjective acceleration clauses, and how could they impact debt classification? Suzanne fills us in. 09:53 - Troubled Debt restructuring (TDR). Debt restructurings can happen for a variety of reasons; and, in times of economic uncertainty, there could be an uptick in TDRs. Suzanne covers the TDR accounting model.  18:07 - Related party debt restructurings. In economic downturns, we may see more related party debt being restructured or extinguished at terms favorable to the issuer. Suzanne helps companies think through the considerations in this area.About our guest Suzanne Stephani is a director in PwC’s National office with more than 20 years of experience assisting companies in resolving complex accounting issues. Suzanne specializes in the accounting for debt, preferred stock, leases, and cash flows. Suzanne is also the lead producer and director of PwC's popular quarterly accounting webcast.  About our host Heather Horn is PwC’s National office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 25 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.  Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected].