188体育

This guidance is applicable to certain events that take place on or after 1聽January 2015.

CTA09/323A

Company A is the borrower under a loan of 拢100,000 which is due for repayment in 18 months鈥� time. It is experiencing financial difficulty and agrees with its third party lender to extend the repayment date of the loan for a further 5 years and to make certain other amendments to the loan (the principal of which remains at 拢100,000). At the time of the 鈥榓mend and extend鈥�, in addition to being in negotiation with its third party lender, Company A has financial reports showing material cash flow shortfalls such that it is likely that Company A would be unable to repay the loan in 18 months鈥� time. The 鈥榓mend and extend鈥� amounts to a substantial modification and so Company A derecognises the 拢100,000 liability under the 鈥榦ld鈥� loan in its accounts and recognises the 鈥榥ew鈥� loan at its fair value which, due to the amendments to the loan and the creditworthiness of the Company A, is 拢75,000. Company A recognises a credit of 拢25,000 in its profit and loss in the accounting period in which the 鈥榓mend and extend鈥� takes place.聽

It then recognises debits of a total of 拢25,000 over the life of the loan as the loan is written back up to its face value.聽

Immediately before the debt modification, it is reasonable to assume that, without the modification and any related arrangements, there would be a material risk that, at sometime within the next 12 months, it could be demonstrated that Company A would be unable to repay the 拢100,000 loan on its scheduled maturity date. The exemption in CTA09/S323A therefore applies such that neither the 拢25,000 credit nor the 拢25,000 debits are brought into account for tax purposes.