Face amount says what the contract promises at maturity. Reacquisition price says what the supplied retirement transaction transfers now. Accrued interest and transaction costs may need separate attribution rather than silent netting.
Only after the derecognition route and consideration are supplied should the schedule compare reacquisition price with net carrying amount.
Identify the retirement consideration
ASC 470-50-40-2 compares reacquisition price with the extinguished debt's net carrying amount. Reacquisition price is the consideration attributed to retiring the debt on the supported transaction date.
If the issuer pays $625,000 to retire debt with $650,000 face, face is not the comparison base. First rebuild the remaining carrying amount from face, discount or premium, and issuance costs. Separate accrued coupon interest and transaction costs when the facts require it. Only the amount attributed to retirement enters the gain-or-loss comparison. This concept does not establish that the liability was extinguished.
Document the date and each included form of consideration so another reviewer can reproduce the comparison without treating the cash payment as a plug.
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- Identify supplied debt-retirement consideration and keep it separate from face amount, accrued interest, and net carrying amount.
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- Carrying amount — Understand
To apply this concept: Required. Extinguishment compares consideration with the liability's net carrying amount.
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- Debt extinguishment — Analyze
Required level here: apply. Required. The supplied consideration is compared with net carrying amount.