Unamortized discount net of premium otal long term

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Unamortized discount, net of premium . -otal long-term debt, including current maturities . less: debt maturing within one year . otal long-term debt . on reports a net book value for long-term debt of $52,794 million at year-end 2010. Of this t, $7,542 million matures in the next year and is classified as a current liability (current ities of long-term debt). The remainder of $45,252 matures after 2011. Verizon also $224 million in unamortized discount (net of premium) on this debt. In addition to long-term debt amounts, rates, and due dates, and as required under GAAP, on reports aggregate maturities for the five years subsequent to the balance sheet date as '5: aturities of Long-Term Debt Maturities of long-term debt outstanding at December 31, 2010, e as follows: Years (dollars in millions) 2011 . 2012 . 2013 . 2014 . 2015 . Thereafter . $ 7,542 5,902 5,915 3,529 1,201 28,705 -- reveals that Verizon is required to make principal payments that total $24,089 million in the five years and an additional $28,705 million in principal payments thereafter. Such maturi- are important information as a company must either meet its required payments, negotiate
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a rescheduling of the indebtedness, or refinance the debt to avoid default. Failing to repay debts (defaulting) usually has severe consequences as debt holders have legal remedies available them that can bankrupt the company. Verizon's disclosure on the fair value of its total debt follows: 7-21 Module 7 I Liability Recognition and Nonowner Financing L03 Explain how credit ratings are determined and analyze their effect on the cost of debt. 2010 2009 Carrying At December 31, (dollars in millions) Amount Fair Value C~rrying Amount Fair Value Short- and long-term debt, excluding capital leases. . . . . $52,462 $59,020 $61,859 $67,359 As of 2010, indebtedness with a book value of $52,462 million had a fair value of $59,020 mil- lion, resulting in an unrecognized liability (which would be realized ifVerizon redeemed the debt of $6,558 million. The increase in fair value is due mainly to a decline in interest rates subse- quent to the bonds' issuance (Verizon's credit ratings have not changed in recent years-see ne: section). The justification for not recognizing unrealized gains and losses on the balance sh and income statement is that such amounts can reverse with future fluctuations in interest rates Further, since only the face amount of debt is repaid at maturity, unrealized gains and losses t arise during intervening years do not affect the company's expected cash flows. This is the same logic for nonrecognition of gains and losses on held-to-maturity debt investments (see Module 9 CREDIT RATINGS AND THE COST OF DEBT Earlier in the module we explained that the effective cost of debt to the issuing company is market (yield) rate of interest used to price the bond, regardless of the bond coupon rate. The mar- ket rate of interest is usually defined as the yield on U.S. Government borrowings such as treasury bills, notes, and bonds, called the risk-free rate, plus a riskpremium (also called a spread).
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