How do you account for the settlement of debt between the acquirer and acquiree in an acquisition?
Settlement of debt
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How do you account for the settlement of debt between the acquirer and acquiree in an acquisition?
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If the debt that is settled was issued by the acquirer, then the acquirer would account for the debt extinguishment under ASC 470 where an extinguishment gain or loss would be recognized if the reacquisition price (fair value or stated settlement amount) differs from the net carrying amount of the debt. If the debt that is settled was issued by the acquiree, then the acquirer would be effectively settling a receivable and would apply the guidance under ASC 805-10-55-21. Any gain or loss recorded on settlement of the debt would be outside of the business combination.