Integra International Audit & Accounting Alert Newsletter May 2025 Issue 5
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Integra International - Audit & Accounting Alert
ISSUE 5 | MAY 2025

At-A-Glance

The Financial Accounting Standards Board (FASB) has submitted a recent proposal to update the accounting treatment for exchanges of debt. The new criteria clarify the circumstances where a transaction can be reported as a new issue of debt along with a corresponding retirement of the former debt. This installment of the Audit & Accounting Alert highlights the developments in this area.

Also, our Worldwide Update covers news from organizations across the globe.

Gerry Herter
Gerald Herter - Editor

Accounting for Debt Exchanges 

  New criteria established    

On April 30, 2025, at the recommendation of the Emerging Issues Task Force (EITF), the Financial Accounting Standards Board (FASB) issued a proposed standard update: Accounting for Debt Exchanges, that affects the FASB Accounting Standards Codification section titled Debt—Modifications and Extinguishments (Subtopic 470-50) and Liabilities— Extinguishments of Liabilities (Subtopic 405-20)

The development of standards for debt goes back for decades, In the early 1970’s, the Accounting Principles Board (predecessor to FASB) issued APB 26 on the early extinguishment of debt, which revised even earlier pronouncements. Since then, further adjustments have occurred, with now this latest proposal recommending changes to the criteria to clarify and simplify the process.

Current guidance necessitates a cash flow test to establish if new debt significantly differs from old debt, and if conversion factors have an impact. Such testing may not be practical and could result in the consideration of totally unrelated transactions as having a connection.

The new criteria states that a new debt has been issued and old debt replaced if the existing and multiple creditors take part and: 

(1) “the existing debt obligation has been repaid in accordance with its contractual terms or repurchased at market terms and

(2) the new debt obligation has been issued at market terms following the issuer’s customary marketing process.”

With the issuance of this new pronouncement, the expectation is that more debt exchanges will be reported as new debt issuances and old debt terminations.

Comments are due by May 30, 2025. Thus far there have been a couple comment letters encouraging broader application to all forms of debt exchanges, and traceability between old and new debt agreements. 

Further details can be found at  Accounting for Debt Exchanges.

Worldwide Update

Periodic roundup of recent and upcoming actions and activities by auditing and accounting organizations throughout the world.

International

IASB – International Accounting Standards Board (www.ifrs.org) 

  • International Sustainability Standards Board (ISSB) (IFRS - International Sustainability Standards     Board) - Exposure Draft - Amendments to Greenhouse Gas Emissions Disclosures. IFRS S2 Climate-related Disclosures), issued April 25, 2025, providing “targeted amendments which would provide reliefs to existing requirements in IFRS S2.” The comment period ends on June 27, 2025.

IFAC – International Federation of Accountants (www.ifac.org)

  • No new developments.

IFR4NPO - International Financial Reporting for Non-Profit Organisations (www.ifr4npo.org)

  • No new developments.

IOSCO – International Organization of Securities Commissions (www.iosco.org)

  • No new developments.

ACCA – Association of Chartered Certified Accountants (www.accaglobal.com)

  • No new developments.

Africa, Europe, India and the Middle East (AEIME)

FRC – Financial Reporting Council of the UK (www.frc.org.uk)

  • No new developments.

ICAEW - Institute of Chartered Accountants in England and Wales (https://www.icaew.com/)

  • No new developments.

EC – European Commission (https://ec.europa.eu/)

  • No new developments.

EFRAG – European Financial Reporting Advisory Group (www.efrag.org)

  • No new developments.

Americas, Asia, Australia and New Zealand (AAANZ)

AICPA & CIMA – American Institute of Certified Public Accountants (www.aicpa.org)

  • No new developments. 

FASB – Financial Accounting Standards Board (www.fasb.org)

  • Exposure Draft - Accounting for Debt Exchanges, Proposed Accounting Standards Update Issued: April 25, 2025. See article in this issue for details. Comments Due: May 30, 2025.

GASB – Governmental Accounting Standards Board (www.gasb.org)

  • Severe Financial Stress and Probable Dissolution Disclosures, preliminary views document issued March 19, 2025, “to address issues related to disclosures regarding going concern uncertainties (GCU) and severe financial stress (SFS) with the intention of making clarifications and improvements to the existing GCU guidance to reduce diversity in practice and providing guidance for disclosures related to SFS.” Comments Due: June 30, 2025.

COSO - The Committee of Sponsoring Organizations of the Treadway Commission (www.coso.org)

  • No new developments.

PCAOB – Public Company Accounting Oversight Board (www.pcaob.org)

  • Audit Focus: Form AP, staff publication released March 13, 2025, “highlights key reminders for auditors from the PCAOB rules, standards, and staff guidance related to Form AP; provides the staff’s perspectives on common deficiencies in auditors’ work; and shares good practices that the staff has observed.”

SASB – Sustainability Accounting Standards Board (www.sasb.org)

  • No new developments

SEC – Securities and Exchange Commission (www.sec.gov)

  • No new developments

Additional A&A News

When accounting judgments lead to legal liability

Blockchain in accounting: A guide for tax and accounting professionals

Auditing and AI: From binders to bots

Unregulated AI usage in workplaces is a compliance nightmare

ACCA urges FRC to ensure proportionate SME audit requirements

Digital Financial Assets - Out Of The Frying Pan And Into The Fire?

Audit & Accounting Alert is a publication of Integra International intended to highlight emerging issues in the profession.  The goal is to give Integra members an awareness of developments impacting the practice of Audit & Accounting enabling them to stay on the forefront of industry trends.This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice.  Please refer to your advisors for specific advice.

Editor Gerald E. Herter

 

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