Clearly, the evolution of debt
extinguishments toward what can be described as routine financial management provides ample support to make a case that separate line item reporting under Accounting Standards Codification (ASC) 225-204516 is not warranted.
also stand to benefit from
extinguishments. Upon
extinguishment of an
Applying this criterion to the previous example, the entity would recognize a loss on the
extinguishment of debt.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," and revised in SFAS No.
The SEC staff has challenged registrants' conclusions as to the accounting 'for debt modifications and
extinguishments. The SEC has also requested richer disclosures concerning the challenges faced in accessing the credit markets in the current economy, the related financial effects, and "the risks and uncertainties associated with each financing option considered" (SEC Comment Letters--Including Industry Insights: improving Transparency, 5th ed., Deloitte, November 2011).
* FASB has issued a special report, A Guide to Implementation of Statement 125 on Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, because this complex statement has generated so many questions from preparers and auditors.
The elimination of gains and losses from debt
extinguishments as extraordinary items significantly changed income statement presentations.
140, Accounting for Transfers and Servicing of Financial and
Extinguishments of Liabilities.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, which changes and clarifies the differences between secured borrowings and sales.
The Financial Accounting Standards Board has published an exposure draft of a proposed accounting standard, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, that attempts to resolve long-standing questions about whether transactions should be accounted for as secured borrowings or as sales.
4, Reporting Gains and Losses from
Extinguishment of Debt, as well as an amendment of that statement, FASB Statement No.
4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.