Early Extinguishment of Debt
1. Debt is frequently extinguished in various ways before its scheduled maturity. Generally, the amount paid upon reac-quisition of debt securities will differ from the net carrying amount of the debt at that time. This Opinion expresses the views of the Accounting Principles Board regarding the appro-priate accounting for that difference.
2. Applicability. This Opinion applies to the early extin-guishment of all kinds of debt. It supersedes Chapter 15 of ARB No. 43 and Paragraph 19 of APB Opinion No. 6. How-ever, this Opinion does not apply to debt that is converted pursuant to the existing conversion privileges of the holder. Moreover, it does not alter the accounting for convertible debt securities described in APB Opinion No. 14. This Opinion applies to regulated companies in accordance with the provi-sions of the Addendum to APB Opinion No. 2, Accounting for the ".Investment Credit," 1962.
3. Definitions. Several terms are used in this Opinion as
a. Early extinguishment is the reacquisition of any form of debt security or instrument before its scheduled maturity except through conversion by the holder, regardless of whether the debt is viewed as terminated or is held as so-called "treasury bonds." All open-market or mandatory reacquisitions of debt securities to meet sinking fund re-quirements are early extinguishments.
Issued by the Accounting Principles Board of the American Institute of Certified Public Accountants
COPYRIGHT 1972 BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, INC. 666 FIFTH AVENUE. NEW YORK, NEW YORK 10019
OPINIONS OF THE ACCOUNTING PRINCIPLES BOARD