Accounting for Debt Exchanges (BDO Comment Letter)
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On April 30, 2025, FASB invited stakeholders to comment on its exposure draft for the accounting for debt exchanges. The amendments may result in some debt exchanges being accounted for extinguishments, bypassing the 10 percent cash flow test.
In our comment letter, BDO supports the Board’s proposal to recognize certain debt exchanges as extinguishments to better reflect the underlying economics of these transactions and provide more useful information to stakeholders. We also suggest a few areas of clarification in the proposed amendments to reduce potential diversity in their application.