Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 14-8 26. The following terms are important to an understanding of the accounting for early extinguishment of debt securities. a. Extinguishment of Debt/Derecognition . When debt is repaid or extinguished, i.e., when an obligation is discharged, cancelled or expires, it is derecognized from the financial statements. b. Reacquisition Price . The amount paid on early extinguishment. Includes any call premium and expense of reacquisition. c. Net Carrying Amount . Amount of bonds payable at maturity, adjusted for unamortized premium or discount. d. Gain or Loss from Extinguishment . Difference between reacquisition price and net carrying amount of bonds, recognized in income of the period of redemption. If reacquisition price exceeds net carrying amount, a loss results. e. Refunding is the exchange of an existing debt instrument with a new one. At the time of redemption, professional judgement must be used to determine whether the
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