Debt and Related Operations 303
Figure A3.2 Decision Tree for the Statistical Treatment of “Capital Injections”(^1) An “effective fi nancial claim” is understood to be a claim that is supported by a contract between the new debtor and the original
debtor, or (especially in the case of governments) an agreement, with a reasonable expectation to be honored, that the original debtor will
reimburse the new debtor.
(^2) A realistic rate of return on funds is indicated by the intention to earn a rate of return that is suffi cient to generate dividends or holding
gains at a later date, and that is a claim on the residual value of the corporation.
Yes No
Yes No Yes No
No
A loan
No
No
Yes
An equity
injection
Yes
Yes
Does the investor
unit obtain
an effective
financial claim^1
on the corporation
in distress?
Is the value of this
claim on the debtor
equal to the present
value of the amount
expected to be
received by the
creditor (investor
unit)?
Is the
corporation
in distress
a going
concern?
The investor unit
records an increase
in financial assets
in the form of loans,
with the corporation
in distress as the
counterparty.
- The investor unit records
an expense in the form
of a capital transfer/
grant to the corporation
in distress for the (a) difference
between the financial asset
acquired and the present value
of the amount expected to be
received; OR (b) portion of the
investment on which no realistic
return can be expected; and - The investor unit records an
increase in financial assets
in the form of equity owned
in the corporation in distress
(equal to the portion of the
investment on which a realistic
claim can be expected, in case of
an equity injection).
Is the
corporation
in distress
a public
corporation?The investor unit
records an expense
in the form of a
capital transfer/
grant to the
corporation in
distress.What is the
legal form
of the “capital
injection”?Can the investor
unit expect a
realistic return^2
on the investment?The investor unit records
an increase in financial
assets in the form of
equity owned in the
corporation in distress
(equal to the portion of
the investment on which a
realistic claim can be
expected, in case of
an equity injection).Is there a
portion of the
investment on
which no realistic
return can
be expected?