The way the company has treated and reported the pendency interest is and has been correct all along. Companies operating within a bankruptcy proceeding that are believed to be insolvent do not accrue interest (on the balance sheets) for unsecured debt. Instead, the insolvent entity will track the accrued and unpaid interest on unsecured debt (off-balance sheet). The insolvent company reports only the amount of interest that is expected to be paid during the pendency of the case and then reports (as a footnote) any shortfall between the amount of interest actually paid and what is actually owed with respect to the contractual rate. To date this is the way the company has handled the reporting of interest and it is correct.
Since the company is now recognizing that it is no longer insolvent, it is now appropriate to recognize the previously unrecorded accrued interest on the unsecured debt. Restatement of prior reports is not required because the question of solvency is only now being answered due to the vetting of claims, filing of the plan and approval of the disclosure statement.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.