Perspective and Issues

Concepts, Rules, and Examples

Notes and Bonds

Notes issued solely for cash

Noncash transactions

Extinguishment of Debt

Gain or loss

Troubled Debt Restructurings



FASB ASC 310-10 creditors

Accounting for Costs Associated with Exit or Disposal Activities


Liability Recognition

One-Time Termination Benefits

Contract Termination Costs

Statement of Activities Presentation


Environmental Remediation Liability


Long-term debt represents future sacrifices of economic benefits to be repaid over a period of more than one year or, if longer, the operating cycle. Long-term debt includes bonds payable, notes payable, lease obligations and pension and deferred compensation plan obligations. The accounting for bonds and long-term notes is covered in this chapter. See Chapter 6 for a discussion on when a not-for-profit organization that has debt outstanding may be considered a public entity for purposes of other financial statement disclosures.

The proper valuation of long-term debt is the present value of future payments using the market rate of interest, either stated or implied in the transaction, at the date the debt was incurred. An exception to the use of the market rate of interest stated or implied in the transaction in valuing long-term notes occurs when it is necessary to use an imputed interest rate (FASB ASC 835-30).

FASB ASC 420-10, discussed in greater detail later in this chapter, ...

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