FAR Debt · Updated November 2026
Debt Was Renegotiated. Is the Old Debt Gone?
First decide whether the old debt survived the restructuring. Then calculate the accounting effect.
Extinguishment
When existing debt is legally extinguished or treated as extinguished under the applicable framework, the old liability is removed and a gain or loss can arise.
Modification
A modification changes terms while the existing obligation remains under the relevant accounting analysis.
Why classification matters
Extinguishment can create immediate gain or loss, while modification may alter the effective interest pattern going forward.
Fees and costs
Fees and costs can receive different treatment depending on whether the transaction is an extinguishment or modification.
The takeaway
Decide whether the old debt survived before calculating the accounting.
Related Summit guides
FAQ
Does every interest-rate change extinguish debt?
No.
Can extinguishment create a gain?
Yes.
Do fees get identical treatment in both cases?
Not necessarily.