ASC 310-40 addresses the accounting by creditors for loans that are restructured in a TDR involving a modification of terms of a receivable, including those involving a receipt of assets in full or partial satisfaction of a receivable. A previously restructured loan is considered impaired when it does not perform in accordance with the contractual terms of the original loan agreement. Under ASC 310-40, all TDRs are considered to be impaired loans. Once impaired, ASC 310-10-35-22 requires the creditor to calculate the present value amount based on an estimate of the expected future cash flows of the impaired loan, discounted at the loan's effective interest rate (see ARM 3560.221). The effective interest rate of a loan is the rate of return implicit in the loan (that is, the contractual interest rate adjusted for any net deferred loan fees or costs, premium, or discount existing at the origination or acquisition of the loan). The effective interest rate for a loan restructured in a troubled debt restructuring is based on the rate described in the original loan documents, not the rate specified in the restructuring agreement.

When a loan is restructured in a troubled debt restructuring into two (or more) loan agreements, the restructured loans should be considered separately when assessing the applicability of the disclosures required by ASC 310-10-50-15 in years after the restructuring because they are legally distinct from the original loan (see ASC 310-40-50-5). The creditor would continue to measure the loan impairment based on the contractual terms specified by the original loan agreement (refer to ASC 310-10-35-20 through 35-26 and ASC 310-10-35-36).