The Financial Accounting Standards Board recently announced a proposed accounting change ending the use of troubled debt restructuring (TDR) for companies that had adopted a new credit losses standard, as explained by Ernst & Young.
But TDRs are coming up in a different context that might create difficulties for commercial real estate property owners that were hit hard by the pandemic, and the coming new year might be far from joyous for them.
TDRs have been a way for lenders to modify a loan's terms, because of a borrower's financial or legal difficulties, and account for an impairment of value. Under the initial CARES Act, that requirement was temporarily postponed as part of pandemic relief so that financial institutions didn't have balance sheet shock, which would have affected their ability, or willingness, to lend.
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