# ASC 470-980-40: Debt — Regulated Operations — 40 Derecognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/470/980/#40-derecognition)

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## ASC 470-980-40: 40 Derecognition

[Read section](https://asc.understandingaccounting.org/asc/470/980/#40-derecognition)

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#### Early Extinguishment of Debt

##### [470-980-40-1](https://asc.understandingaccounting.org/asc/470/980/#470-980-40-1)

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Subtopic 470-50 requires recognition in income of a gain or loss on an early extinguishment of debt in the period in which the debt is extinguished. For rate-making purposes, the difference between the entity's net carrying amount of the extinguished debt and the reacquisition price may be amortized as an adjustment of interest expense over some future period.

##### [470-980-40-2](https://asc.understandingaccounting.org/asc/470/980/#470-980-40-2)

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If the debt is reacquired for an amount in excess of the entity's net carrying amount, the regulator's decision to increase future rates by amortizing the difference for rate-making purposes provides reasonable assurance of the existence of an asset (see paragraph [980-340-25-1](https://asc.understandingaccounting.org/asc/340/980/#340-980-25-1)). Accordingly, the regulated entity shall [capitalize](https://asc.understandingaccounting.org/glossary/c/#capitalize "Capitalize is used to indicate that the cost would be recorded as the cost of an asset. That procedure is often referred to as deferring a cost, and the resulting asset is sometimes described as a deferred cost.") the excess cost and amortize it over the period during which it will be allowed for rate-making purposes.

##### [470-980-40-3](https://asc.understandingaccounting.org/asc/470/980/#470-980-40-3)

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If the debt is reacquired for an amount that is less than the entity's net carrying amount, the regulator's decision to reduce future rates by amortizing the difference for rate-making purposes imposes a liability on the regulated entity (see paragraph [980-405-25-1(c)](https://asc.understandingaccounting.org/asc/405/980/#405-980-25-1)). Accordingly, the entity would record the difference as a liability and amortize it over the period during which permitted rates will be reduced.