CFA Practice Question

CFA Practice Question

A gain or loss from the early retirement of debt should be ______
A. recognized in income before taxes in the period of retirement.
B. amortized either over the life of the new issue or over the remaining original issue of the retired issue.
C. recognized as an extraordinary item in the period of retirement.
Explanation: Note that gains and losses from the early retirement of debt were treated as extraordinary items but SFAS No. 145 (2002) requires them to be treated as part of continuing operations.

User Contributed Comments 5

User Comment
sekib pg 348 White et al states that SFAS 145 (2002) recinds that gains/losses are treated as extraordinary items but rather as components of continuing operations!
Rguerra Schweser book 3 page 50 is wrong about this. It still treats this as an extraordinary item.
ramdabom Gain/loss on early retiredment of debt is treated as a component of continuing operations. This is straight from the CFA curriculum.
cong The gains or losses due to early retirement of debt should be recorded above the line.
bkballa What about on the statement of cashflows? Does gain/loss on early retirement of debt affect the CFF or CFO?
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