Improving Income Statement Reporting of Debt Extinguishments

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To make informed decisions, financial statement users need to understand the nature of the items on a company's income statement, particularly whether they are persistent or transient, in order to properly evaluate their current performance implications and future cash flow consequences. Historically, accounting standards have given income statement gains and losses careful attention when there are concerns that these components are nonrecurring and may be misunderstood if not clearly described. Formerly, debt extinguishment transactions required prominent reporting as separate line items, but this is no longer the case. In the interest of full transparency, the authors believe that FASB should reestablish separate line item reporting to ensure users can fully comprehend their impact.

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