hard · Private Credit & Debt loan-structures-instruments
A direct lending fund marks a loan at 96 cents on the dollar due to a general widening of market credit spreads, although the borrower's credit performance is stable.
According to ASC $820, how should this valuation change be treated in the fund's financial statements?
- It should not be recorded if the borrower is still making all contractual payments.
- As a realized loss because the market price has declined.
- As a direct reduction to shareholders' equity, bypassing the income statement.
- As an unrealized loss that flows through the Statement of Operations.
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