Second, the legal significance of accounting rules in the process of debt restructuring

(A) the legal nature and accounting nature of debt restructuring III. Legal analysis of accounting standards for debt restructuring

(1) How to determine the recorded value of the restructured creditor's rights under the restructuring mode of modifying the debt conditions?

1, the provisions of the current accounting standards and their impact

Debt restructuring is carried out by modifying the debt terms, including extending the debt repayment period, reducing the debt interest rate, exempting the accumulated interest of the original debt, exempting part of the debt, or a combination of the above methods. Item 8 of Accounting Standards for Business Enterprises-Debt Restructuring stipulates: "If debt restructuring is carried out by modifying other debt conditions, the debtor shall write down the book value of the restructured debt to the amount payable in the future, and the amount written down shall be included in the current profit and loss as debt restructuring income". The Accounting Standards for Business Enterprises-Debt Restructuring issued by the Ministry of Finance interprets "future payable amount" as including the face value and interest of future payable debts. [7] Accordingly, in this debt restructuring method, the creditor should write down the book balance of the creditor's rights to the future receivable amount, and the write-down amount should be included in the current profit and loss as a debt restructuring loss (Item 14 of the Accounting Standards for Business Enterprises). The amount receivable in the future includes the face value and interest of the restructured creditor's rights.

It can be seen that the current accounting standards mainly stipulate the entry value of new creditor's rights in two points: first, the entry value of restructured creditor's rights is the total amount to be paid in the future, and it is not converted into present value; Second, the total future payment includes future accrued interest. The illustration is as follows:

Suppose that Company A owes Bank B a three-year loan of 6,543.8+0,000 yuan with an annual interest rate of 654.38+00%. Due to the financial difficulties of Company A, it is impossible to repay the due principal and interest of RMB 6,543,800+RMB 3,000. The two sides reached a debt restructuring arrangement of delaying repayment and lowering interest rates. Bank B agreed to give Company A a two-year grace period, with the interest rate reduced to 5% (the market interest rate in the same period was 8%) and the accumulated interest of the original loan was exempted. According to accounting standards, for Company A, the recorded value of the restructured debt is 165438+ ten thousand yuan, namely 1 ten thousand yuan of principal and two years' interest). Compared with the original debt book value of 1.3 million yuan, the debtor realized the reorganization income of 200,000 yuan. On the other hand, Bank B recorded the future receivables of 654.38+065.438+million yuan as the restructured creditor's rights, and recognized the difference of 200,000 yuan from the book value of the original creditor's rights of 654.38+03 million yuan as the restructuring loss.

The above examples show that under the current accounting standards, two losses of banks have not been fully recognized:

One is the exempted part of the debtor's original three-year loan interest of 300,000 yuan (that is, 6,543,800 yuan+10,000 yuan). The reason for this result is that the recorded value of restructured creditor's rights is defined as "total future payment", including "future accrued interest". Because the interest loss of the original loan and the accrued interest under the new loan arrangement cancel each other out, only the difference between the two interests is confirmed.

Second, under the new loan arrangement, the market interest rate loss implied by the spread between the agreed interest rate of 5% and the current market interest rate of 8%. The reason for this result is that the recorded value of restructured creditor's rights is the total amount to be paid in the future and has not been converted into present value.

2. Influence of future interest payable on the interests of all parties.

Debt restructuring in the form of modifying debt conditions refers to the activities of the parties to the creditor-debtor relationship to change the original contractual relationship and establish a new creditor-debtor relationship. The recorded value of new creditor's rights (debts) formed after reorganization not only reveals the monetary concessions made by creditors, but also serves as the coordinates of the expected future interests or contributions of both parties. It should accurately reflect the new contractual relationship between the two parties after the reorganization, and lay a reliable foundation for further confirming the influence of the restructured debt on the financial situation and operating results of both parties in accounting. The provision that future interest payable should be included in the value of new debt after restructuring obviously deviates from this concept.

From the creditor's point of view, the future interest of the restructured debt is actually the future income that the creditor can expect to obtain under the new contractual relationship. The interest payable in the future is included in the book value of restructured debt, which inflated the interest consideration actually obtained by creditors in debt restructuring, reduced the amount of restructuring losses that creditors should confirm, and failed to fully reflect the concessions made by creditors. On the other hand, when the creditor actually receives interest in the future, it directly offsets the book value of the creditor's rights, which cannot reflect the creditor's interest income and distorts the creditor's financial situation.

From the debtor's point of view, if the future interest payable on the restructured debt is included in the book value, the debtor will reduce the recognition of the restructuring income and reduce the related tax burden. At the same time, when the debtor pays interest in the future, it will directly reduce the face value of the debt, and will not incur financial expenses such as interest, which fails to truly reflect the debtor's financing cost.

It can be seen that the future interest of the restructured new debt is included in the book value of the debt, which on the one hand conceals the degree of creditor's concession, and on the other hand cannot truly and fairly reflect the future financing relationship between creditors and debtors.

3. Rethinking the problem of folding in half.

Whether the future interest should be recorded is related to the discount factor. Debt restructuring in the form of modifying debt terms objectively implies the premise of "taking the time of contract modification as the calculation time of profit and loss". At this point, the original debt was terminated and the new debt was undertaken. In the case that the new debt has a face value and bears interest (such as the case that the old loan extends the repayment period and bears interest), the accounting standard makers actually face two choices: (1) consider the discount factor; This means that the new debt is recorded at the present value, and the difference between the present value of the new debt and the book value of the original debt reflects the profit and loss sharing between the parties. When calculating the present value, it includes the face value of new debt and future interest payable. Therefore, under the premise of considering the discount factor, future interest should be recorded, but it should be discounted at a certain discount rate. (2) Without considering the discount factor, that is, according to the face value of the new debt when the contract is revised, the profit and loss are confirmed according to the difference between the face value of the new debt and the book value of the original debt. At this time, the future interest part should not be recorded, nor can it participate in the calculation of profit and loss, otherwise the recorded value of new debts will be inflated, which can not fully reflect the actual restructuring interests of debtors and the actual concession degree of creditors.

The current accounting standards for debt restructuring do not consider the discount factor, which is mainly based on the actual situation of the providers and demanders of accounting information at present in China. [8] However, on the one hand, the accounting standards exclude the discount factor, on the other hand, the future interest payable is accounted for, which fails to maintain its logical consistency, which will inevitably lead to the result of "a happy family and a worried family" between debtors and creditors.

(2) Should the restructuring gains and losses be confirmed under the debt-to-equity swap?

The core of debt restructuring from creditor's rights to equity is how to determine the value of equity and reflect it in financial statements, which is closely related to whether to confirm the profit and loss of restructuring. The current Accounting Standards for Business Enterprises-Debt Restructuring uses the fair value of equity to calculate and confirm the profit and loss of restructuring. Item 7 stipulates that the debtor shall confirm the total face value (or equity share) of the shares enjoyed by the creditor due to giving up his creditor's rights as equity (or paid-in capital); The difference between the fair value of shares and share capital (or paid-in capital) is recognized as capital reserve. The difference between the book value of the restructured debt and the total fair value of the shares shall be included in the current profit and loss as debt restructuring income. Accordingly, item 13 of the Accounting Standards for Business Enterprises-debt restructuring requires creditors to confirm the fair value of their equity as long-term investment; The difference between the book balance of restructured creditor's rights and the fair value of equity is recognized as restructuring profit and loss.

The rule is as follows:

Suppose that Company A sells a batch of materials to Company B and obtains a semi-annual commercial acceptance bill with interest issued by the latter. Due to the financial difficulties of Company B, the bill cannot be cashed at maturity. The two sides reached a debt restructuring arrangement of debt-to-equity swap: Company B replaced the original commercial draft with its 65,438+0,000 common shares. On the reorganization date, the sum of the principal and interest of the draft is 6.5438+0.04 million yuan, the par value of the common stock of Company B is 654.38+0 yuan, and the market price of the stock is 9.6 yuan per share, excluding tax. For this debt restructuring, Company B confirmed the restructuring income of 8,000 yuan (the book value of debt is 654.38+0.04 million yuan-the fair value of equity is 96,000 yuan), and at the same time confirmed the share capital of 654.38+0.00 million yuan and the capital reserve of 86,000 yuan. Company A confirmed that the equity investment was 96,000 yuan, and the restructuring loss was 8,000 yuan. [9]

From the accounting principle, it seems that the reasons for confirming the profit and loss of restructuring in debt-to-equity swap are very sufficient. [10] However, if we temporarily jump out of the framework of accounting technical issues and look at this provision from a legal or fair point of view, we will inevitably have another feeling, that is, the price of debt-to-equity swaps seems unacceptable to creditors.

An implicit premise of the current accounting standards is that: under the debt-to-equity swap, the book value of the original debt must be greater than the fair value of the equity after replacement, that is, the creditor suffered "restructuring losses" at the same time of debt-to-equity swap; Accordingly, the debtor increases the share capital and capital reserve to realize the profit and loss of reorganization. However, it is necessary for us to question the legitimacy of the debtor's "restructuring gains" and the inevitability of the creditor's "restructuring losses". Imagine that if creditors do not agree to make concessions to restructure their debts, but force them to pay off their debts, debtors may be forced into bankruptcy liquidation. In this case, it is entirely possible for creditors to gain a more favorable position for existing shareholders, because all their claims can be classified as bankruptcy claims and paid off before shareholders. However, after the reorganization according to the current accounting standards, part of the creditor's right is abandoned, part of it is converted into capital reserve, and the rest is converted into equity or paid-in capital to share the net assets of the enterprise with other shareholders. The net assets of enterprises with financial difficulties are usually not an exciting figure. Comparing the two ways, there is a great difference in the interests of creditors between debt-to-equity swap and immediate realization of creditor's rights, which makes people question the feasibility of this debt restructuring. [ 1 1]

There are several reasons to support the practice of accounting standards to confirm restructuring gains and losses: first, because debt restructuring means creditors' concessions, it is inevitable to give up part of the creditor's rights, and it is also inevitable to have restructuring losses; [12] Second, the equity was recorded at book value, and the restructuring income was not separately confirmed, which failed to reflect the economic nature of the transaction and failed to convey the valuable information that the debtor actually benefited; [13] III. Equity is accounted for at fair value, with the face value or equity share of the shares as paid-in capital, and the difference between equity or paid-in capital and equity fair value as capital reserve, which conforms to the accounting principles of general stock issuance. [14] Fourth, accounting standards are only technical specifications for recording transactions. Whether the book value of creditor's rights is greater than the fair value of equity and whether there are reorganization gains and losses is the result of negotiation between the two parties. Accounting only passively records the real restructuring gains and losses.

The author believes that the above four reasons are difficult to establish.

1, what is "creditor concession"?

When the debtor is in financial trouble, it is a concession to the debtor to convert the creditor's rights into equity, which at least reduces its interest burden and debt repayment pressure, reduces its financial leverage ratio and improves its financial structure. Moreover, China's current accounting standard for business enterprises-debt restructuring does not consider the discount factor when measuring creditor's concession, and has already made a discount when confirming the degree of creditor's concession. Therefore, considering the special time for creditors to become shareholders, the debt restructuring that forces creditors to sacrifice part of their claims for equity is actually depriving creditors of their legitimate rights and interests. The substantial result is that creditors are forced to make double concessions: one is forced to accept the debt-to-equity swap scheme, and the other is that the fair value of the converted equity is lower than the book value of the creditor's rights.

2. What is "valuable information in debt restructuring"?

Whether debt restructuring brings substantial "restructuring benefits" to debtors has always been controversial. [15] From the actual situation, if the creditor's rights are not secured by mortgage, the creditor will not give in until the debtor's realizable assets are exhausted. In this case, for debtors who have exhausted their realizable assets, it is of little practical significance to show "restructuring income" on their books. Where the creditor's rights are secured by mortgage, there is no need for the creditor to make concessions unless the net realizable value of the collateral is reduced. If the creditor gives in when the collateral depreciates, although the debtor's debt is reduced, he is not profitable because the value of the assets as collateral is reduced at the same time as the debt. [16] In the case of debt-to-equity swap, whether there is measurable "restructuring income" in accounting is a controversial issue. [17] If it is only to convey the valuable information of "debt restructuring" (instead of restructuring gains and losses), information disclosure seems to be a better choice. It can not only achieve the purpose of transmitting information to the outside world, but also avoid the misleading effect that the reorganization income may be included in the debtor's income statement. [ 18]

3. How to confirm the entry value of equity in general stock issuance?

In accounting, the recorded value of owner's equity is determined according to the actual cost principle. Regardless of the general stock issuance or debt-to-equity swap, the recorded value of equity is the consideration actually received by the issuing company. In debt-to-equity swap, this consideration is expressed by the book value of the creditor's rights, which represents the actual investment of the creditor/new shareholder in the company. Actual cost measurement is the objective requirement of the registered capital system of company law for accounting measurement. [19] In practice, when issuing shares, the recorded value of equity is based on the consideration actually received by the company. When a company issues a rights issue in the course of operation, regardless of the relationship between the rights issue price and the stock market price (if the company's stock has a market price), the company still determines the entry value of the equity according to the rights issue price rather than the fair value of the equity. The accounting practice of ordinary convertible bonds also tends to record the book value of debts, and [20] does not recognize the income from conversion. Therefore, if it is to achieve consistency with the accounting treatment of general stock issuance, the equity in debt restructuring should be accounted according to the book value of creditor's rights, not to confirm the profit and loss of restructuring.

4. Is the accounting standard of debt restructuring just a negative reflection tool?

The viewpoint of accounting technology or accounting tool theory seems to completely reject the criticism of the current accounting standards from the legal point of view. However, as pointed out in the second part of this paper, in the current debt restructuring process of Chinese enterprises, accounting standards are not only passive and passive accounting rules, but also rights creation rules [2 1]. The defects in the allocation of debt restructuring system, especially the lack of legal rules, make the accounting standards for debt restructuring objectively have the role of demonstration and guidance of general legal norms. To a certain extent, it sets the negotiation path between creditors and debtors and lays the basic framework for the distribution of rights and obligations between them. The accounting model of "creditor's rights = equity+capital reserve+restructuring gains and losses" adopted by the current accounting standards takes it as a natural result that creditors give up part of their creditor's rights and bear restructuring losses, which will inevitably have a negative impact on debt restructuring practice. For example, the attention of creditors and debtors first focuses on the sensitive issue of how much creditor's rights should be given up. The unfair treatment felt by creditors is bound to increase their resistance to debt restructuring and prolong the process of debt restructuring. The benefits of high efficiency and low cost to debtors are usually considered as the most direct motivation for debtors to seek debt restructuring rather than bankruptcy. [22] In this sense, the confirmation of restructuring gains and losses in debt-to-equity swap is beneficial to the debtor on the surface, [23] actually harms the debtor's interests. On the contrary, if the accounting standards for debt restructuring do not confirm the profit and loss of restructuring, but require all creditor's rights to be accounted according to the fair value of equity, then the concern of creditors and debtors will shift to the determination of the fair value of equity, which is more objective than "giving up creditor's rights". With the participation of evaluation agencies or other intermediaries, creditors and debtors can easily reach an agreement, thus speeding up the process of debt restructuring.

To sum up, we can't agree to confirm the debtor's "restructuring gains" and the creditor's "restructuring losses" in debt-to-equity swap restructuring, whether we follow general accounting principles or focus on the legal mechanism of balancing the interests of creditors and debtors. All creditor's rights should be converted into shares according to the proportion between their book value and the fair value of equity, which is the legitimate rights and interests of creditors. Accounting does not recognize the "restructuring gains and losses" in this case, not because the creditors have not made concessions, but because the creditors have made concessions, that is, when the debtor has financial difficulties, it is impossible (or difficult under the current accounting technology) to confirm and measure it by accounting methods.

Absence of creditor's interest subject: theoretical paradox?

(1) Two examples

The legal analysis of the accounting standards for debt restructuring seems to draw the conclusion that the standards fail to correctly define the interests of creditors. It should be admitted that this conclusion is almost entirely the result of theoretical deduction, and whether it can really be established still needs an empirical study on the economic consequences of the debt restructuring criteria. Due to the limitation of data and ability, this paper can't complete this task.

On the other hand, in practice, we also find some examples that can be called "theoretical paradox". Whether it is the formulation of accounting standards for debt restructuring abroad or the debt restructuring of enterprises in China, creditors' attention to accounting standards seems to run counter to our supposed interest orientation. For example, in the third part of this paper (1), it is commented that "the restructured new debts are accounted for according to the total amount payable in the future, and the concessions made by creditors are not fully made" [24] points out that it is unfair to creditors. However, in practice, it seems that creditors do not want to fully reflect the concessions they have made. On the contrary, they may demand that the restructuring losses be recognized as little as possible, or be more concerned about the debtor's acquisition of restructuring benefits. The former situation is most obvious in the process of formulating accounting standards for debt restructuring in the 1970s in the United States, and the example of the latter situation is also easy to get from the current securities market in China.

When the United States 1975 formulated the Financial Accounting StandardsNo. 15-Accounting Treatment of Debt Restructuring of Creditors and Debtors, the Financial Accounting Standards Committee and the accounting circles represented by the American Institute of Certified Public Accountants tended to fully estimate and reveal the creditors' restructuring losses, requiring creditors (mainly commercial banks) to confirm the losses immediately, and the measurement of the losses was the discounted value of new debts (excluding various expenses). This proposal was strongly opposed by American commercial banks and banking supervision departments, believing that it exaggerated the bank's debt restructuring losses and demanded that the discount factor be removed when determining the new claim amount. The Financial Accounting Standards Committee finally succumbed to the pressure of the banking industry. Therefore, as long as the sum of the due principal and interest is equal to the book value of the original creditor's rights, the creditor can think that there is no reorganization loss in the new creditor's rights arrangement with delayed performance and lower interest rate.

In our country, creditors' indifference to their own interests is manifested in another way. We can see that some listed companies with financial difficulties can easily get the debtor's exemption from their debts, or creditors agree to convert their creditor's rights into shares. Take Ruyi Group Limited by Share Ltd as an example. The company carried out five debt restructurings on 1999, and confirmed the restructuring income of16.39 million yuan, accounting for 49% of the total profit of that year. The five forms of debt restructuring are different, and their creativity is convincing: some creditors directly forgive debts as affiliated companies, [25] some low-value assets pay off high debts, [26] some pay off debts in series, and the restructuring income is formed twice, [27] some even directly undertake other people's debts, and then they are exempted, forming restructuring income. [28] It seems that the creditors of Ruyi Group have racked their brains not to recover their claims, but to give up their rights, which is quite contrary to common sense.

How to explain these phenomena? Does it mean that it is unnecessary to require accounting standards to pay attention to the interests of creditors? Does it prove that the starting point of this paper-balancing the interests of debtors and creditors-is meaningless for the study of accounting standards?

(B) the specific analysis of the interests of creditors

In practice, the absence of the creditor's interest subject is caused by many factors. The composition of creditors, the timing of relevant accounting standards, the special value of debtors to creditors, etc. , may lead to the loss of the interests of creditors. [29]

Or take the twists and turns of the above-mentioned American accounting standards for debt restructuring as an example. 1975 the background of the debt restructuring rules formulated by the financial accounting standards Committee was three kinds of debt crises at that time: the general default of real estate mortgage loans in the 1970s, the failure to repay billions of new york government bonds due, and the rise in interest rates caused by inflation in the mid-1970s, which greatly devalued the original long-term credit assets of banks. In these three types of debt crises, the creditors are all banks, so it is banks that are most closely related to the accounting standards for debt restructuring. There are three main reasons why bank creditors object to the recognition of restructuring losses by discount method: first, considering the seriousness of inflation at that time, the introduction of discount factor may lead to the bank's financial statements reflecting huge losses; Second, in the case that the banking industry is generally burdened with real estate mortgage loans, asset securitization and other risk transfer mechanisms have not yet been established, requiring banks to confirm the restructuring losses without reservation will not only affect the financial image of individual banks, but also may trigger a credit crisis in the entire financial system; Thirdly, the introduction of discount factor in loss measurement means that banks are required to confirm the loss of expected return of current assets due to changes in market interest rates, even if the debtor of the bank has no possibility of default. This is actually the application of present value accounting method to banks. It is unfair to ask banks to adopt the present value accounting method when all other industries are still using the historical cost method. It can be said that Bank of America's opposition to the accounting standards for debt restructuring is a special manifestation of its protection of its own interests. [30]

The lack of creditor's interest subject in debt restructuring of listed companies in China is based on the special mechanism of China's securities market operation at present. The preciousness of listed company's "shell" resources leads its main creditors-usually its major shareholders-to measure the value of listed company debtors in another way. Therefore, through the way of exempting the creditor's rights to transfuse blood for the listed company, although the creditor has suffered a debt restructuring loss [3 1], the negative effect of this loss will not appear immediately because the creditor's own financial report has not been disclosed. On the contrary, the debtor's income from debt restructuring is immediate: the profit rate of listed companies' net assets is greatly improved, so that they can qualify for rights issue; [32] Some ST companies turned losses into profits, which not only got rid of the nightmare of sliding into the PT abyss due to losses for three consecutive years, but also took off the ST hat in one fell swoop because of book profits, and there was no danger of delisting for at least the next three years. [33] Creditors-major shareholders can also enjoy listing resources for three years. It can be seen that creditors' disregard for their own interests in the form of large-scale debt forgiveness is essentially a special way for creditors to protect their own interests under the current market mechanism in China, but it is only a distorted form. The recognition of the profit and loss of debt restructuring by the current accounting standards just caters to the needs reflected by the distortion of creditors. [34]

(3) Some enlightenment

From this point of view, the existence of the above-mentioned "paradox" phenomenon does not prove the absence of the creditor's interest subject. On the contrary, it vividly shows the concrete embodiment of the creditor's interests in the accounting standards for debt restructuring, and shows the importance of studying the accounting standards for debt restructuring from a legal perspective. On the other hand, the existence of these "paradoxes" also reminds us that the interests of creditors have completely different forms of expression in different periods and different economic backgrounds, and the measurement of their interests is not as direct and clear as the numerical conclusion in an accounting treatment example. Therefore, when analyzing the accounting standards of debt restructuring, we should not simply be satisfied with theoretical deduction, but pay attention to the specific background of debt restructuring pointed by accounting standards and make a comprehensive and detailed analysis of the interests and needs of all parties involved.

In recent years, China's debt restructuring has more reflected the characteristics of state intervention than the market behavior in a strict sense. Therefore, it is not surprising that creditors pay little attention to the accounting standards for debt restructuring that directly affect their immediate interests. As debt restructuring enters the standardized market-oriented operation track, the balance of rights and obligations of all parties will inevitably become the focus of attention of both sides. At present, the deadlock in the practice of debt-to-equity swap in China and the theoretical debate surrounding debt-to-equity swap fully reflect this point. In this sense, China Xinda Asset Management Company's refusal to convert debt into equity and demand the debtor to go bankrupt can be regarded as a sign, which shows the awakening of creditors' consciousness in debt restructuring and also sends a strong signal to the system construction of debt restructuring. As the technical support of debt restructuring, although the accounting standards of debt restructuring are the product of reform in recent years, the problems raised in the third part of this paper based on analysis are probably inseparable from the construction or reconstruction process of this system.

Verb (abbreviation of verb) conclusion

Perfect market, accounting and legal rules are the necessary institutional arrangements for the smooth progress of debt restructuring. In the above three aspects, only accounting standards are emerging in China at present. However, the theoretical analysis of accounting standards from the legal point of view shows that the current accounting standards for debt restructuring fail to pay necessary attention to the interests of creditors, which may strengthen the interest drive of debtors seeking debt restructuring to some extent.

Interpreting accounting standards from a legal perspective is a new attempt in research methods. It has its specific existence basis, that is, the setting function of debt restructuring accounting system on the rights and obligations of all parties and the distribution of interests. Although accounting, as a "common business language", is highly technical and neutral, the economic consequences of accounting standards require the standard makers to pay attention to the objects they describe and reflect, especially the prominent interests. The types of debt crisis in a specific country, a specific period and a specific socio-economic and cultural background constitute the specific background of debt restructuring in various countries. It is possible to put forward completely different requirements for the accounting standards of debt restructuring from the presupposition in accounting theory. It seems an inevitable choice to configure the system to meet this requirement. Of course, the verification of this research idea itself and the final conclusion of the economic consequences of debt restructuring accounting standards may need to be made through empirical research. In this sense, this paper probably just sets a goal.

Reference:/articlehml/article _ 2944.asp

I hope it helps you.