Credit unions certainly were not immune from the affects of the Great Recession. As a result of the downturn, many members have become delinquent on outstanding loans. Over the past few years, many credit unions have been forced to either reduce or renegotiate the debt owed to them by numerous members.

As a result, credit unions are now grappling with the issue of troubled debt restructuring and its impact on their bottom lines. TDRs have become quite the buzz word in the credit union industry. It's an accounting issue that many credit unions have not dealt with since the early 1990s–the last significant economic downturn in the United States–and some not at all.

TDR accounting has some of the most difficult accounting rules to interpret, primarily because they are subjective in nature. To further complicate matters, there are little regulatory or industry best practice guidelines. The lack of clear and concise guidance has created a great deal of confusion in regard to TDR accounting. To help make some sense out of this situation, let's start by separating some common myths from reality as it relates to TDRs.