20022 Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Rules and Regulations

1Paragraph 3 of SFAS 76 states that ‘‘[a] debtor

shall consider debt to be extinguished for financial

reporting purposes in the following circumstances:

a. The debtor pays for creditor and is relieved of

all of its obligations with respect to the debt. This

includes the debtor’s reacquisition of its

outstanding securities in the public securities

markets, regardless of whether the securities are

cancelled or held as so-called treasury bonds.

b. The debtor is legally released from being the

primary obligor under the debt either judicially or

by the creditor and its is probable that the debtor

will not be required to make future payments with

respect to that debt under any guarantees. (footnotes

omitted)

c. The debtor irrevocably places cash or other

assets in a trust to be used solely for satisfying

scheduled payments of both the interest and

principal of a specific obligation and the possibility

that the debtor will be required to make future

payments with respect to the debt is remote. In this

circumstance, debt is extinguished even though the

debtor is not legally released from being the

primary obligor under the debt obligations.’’

2The extinguishment of a debt obligation

subsequent to the balance sheet date but prior to the

issuance of financial statements reporting as of and

for the period ended on the balance sheet date

should not result in adjustment to those financial

statements.

September 16, 1994, is amended as

follows:

Paragraph 500 General

* * * * *

AGL MI D Detroit, MI [Revised]

Detroit, Willow Run Airport, MI

(Lat. 42°14′16′′ N., long. 83°31′50′′ W.)

That airspace extending upward from the

surface to but not including 3,000 feet MSL

within a 4.4-mile radius of Willow Run

Airport, excluding that airspace within the

Detroit, MI, Class B airspace area.

* * * * *

AGL IL D Alton, IL [Revised]

Alton, St. Louis Regional Airport, IL

(Lat. 38°53′25′′ N., long. 90°02′45′′ W.)

That airspace extending upward from the

surface to and including 3,000 feet MSL

within a 4.2-mile radius of the St. Louis

Regional Airport, excluding that airspace

within the Lambert-St. Louis International

Airport, MO, Class B airspace area. The Class

D airspace is effective during the specific

dates and times established in advance by a

Notice to Airmen. The effective dates and

times will thereafter be continuously

published in the Airport/Facility Directory.

* * * * *

Issued in Des Plaines, Illinois on April 11,

1995.

Roger Wall,

Manager, Air Traffic Division.

[FR Doc. 95–10042 Filed 4–21–95; 8:45 am]

BILLING CODE 4910–13–M

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 211

[Release No. SAB 94]

Staff Accounting Bulletin No. 94

AGENCY: Securities and Exchange

Commission.

ACTION: Publication of staff accounting

bulletin.

SUMMARY: The interpretations in this

staff accounting bulletin express the

views of the staff regarding the period

in which a gain or loss is recognized on

the early extinguishment of debt.

EFFECTIVE DATE: April 18, 1995.

FOR FURTHER INFORMATION CONTACT:

Tracey Barber, Office of Chief

Accountant (202) 942–4400, or Douglas

Tanner, Division of Corporation Finance

(202) 942–2960, Securities and

Exchange Commission, 450 Fifth Street

NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The

statements in staff accounting bulletins

are not rules or interpretations of the

Commission nor are they published as

bearing the Commission’s official

approval. They represent interpretations

and practices followed by the Division

of Corporation Finance and the Office of

the Chief Accountant in administering

the disclosure requirements of the

Federal securities laws.

Margaret H. McFarland,

Deputy Secretary.

PART 211—[AMENDED]

Accordingly, Part 211 of Title 17 of

the Code of Federal Regulations is

amended by adding Staff Accounting

Bulletin No. 94 to the table found in

Subpart B.

Staff Accounting Bulletin No. 94

The staff hereby adds Section AA to

Topic 5 of the Staff Accounting Bulletin

Series. Topic 5–AA provides guidance

regarding the period in which a gain or

loss is recognized on the early

extinguishment of debt.

Topic 5: Miscellaneous Accounting

* * * * *

AA. Recognition of a Gain or Loss on Early

Extinguishment of Debt

Facts: In the fourth quarter of its fiscal

year, a registrant announces its intent to call

for redemption certain of its outstanding debt

obligations. By their terms, the debt

obligations are not callable until the third

quarter of the subsequent fiscal year. The

obligations will be redeemed for an amount

that exceeds the net amount at which they

are carried on the registrant’s balance sheet.

The debt extinguishment would not be

deemed a troubled debt restructuring

addressed by Statement of Financial

Accounting Standards No. 15, ‘‘Accounting

by Debtors and Creditors for Troubled Debt

Restructurings.’’

Question: Would the staff object if the

registrant recorded the loss expected to result

from redemption of the debt obligations (the

excess of the reacquisition cost over the net

carrying amount of the extinguished debt) in

the period that it announces its intent to call

the debt for redemption?

Interpretive Response: Yes. Accounting

Principles Board Opinion No. 26, ‘‘Early

Extinguishment of Debt,’’ (APB 26) and its

amendments, including, among others,

Statement of Financial Accounting

Standards No. 76, ‘‘Extinguishment of Debt,’’

(SFAS 76) govern the accounting and

disclosure for extinguishment of debt.

Pursuant to APB 26, the gain or loss from an

extinguishment of debt ‘‘should be

recognized currently in income of the period

of extinguishment.’’ Paragraph 3 of SFAS 76

identifies the circumstances under which a

debt obligation would be considered

extinguished.1 The staff would object to

recognition of a gain or loss from a debt

extinguishment in a period other than the

period in which the debt is considered

extinguished.2 Disclosure regarding a

planned extinguishment and its likely effects

would be required in footnotes to the

financial statements and in Management’s

Discussion and Analysis to the extent

material. In periods preceding

extinguishment, interest expense and other

carrying costs of the debt should be

recognized in accordance with the terms of

the instrument. Deferred debt issue costs and

debt discount or premium would continue to

be amortized based on the life of the debt that

was assumed when the obligation initially

was recorded.

Some registrants have suggested that

Statement of Financial Accounting

Standards No. 5, ‘‘Accounting for

Contingencies,’’ (SFAS 5) requires

recognition of an estimated loss on

extinguishment when the extinguishment

becomes probable, such as upon an issuer’s

announcement of a plan to call the debt. The

staff does not believe that SFAS 5 supersedes

or conflicts with other authoritative literature

providing specific guidance concerning the

accounting for debt extinguishment. A

probable and estimable loss is recognized

under SFAS 5 if, and only if, an asset has

been impaired or a liability had been

incurred at the balance sheet date. The staff

believes that announcement of an intent to

extinguish a liability in the future does not,

by itself, result in a requirement to recognize

a loss. Further, the staff believes that an

issuer’s irrevocable offer to repurchase a debt

obligation is not sufficient to result in the

debt’s extinguishment for accounting

purposes. A debt holder’s acceptance of that

offer at or prior to the balance sheet date by

means of tendering the security and

surrendering all rights under the instrument’s

terms, however, would be considered an

extinguishment of that debt. In the case of an

issuer’s call of a debt obligation (including an

original issue discount obligation),

extinguishment is not considered to have

occurred before interest ceases to accrue or

accrete under the terms of the obligation as

a result of the call. In any case, loss

recognition is not elective under SFAS 5. The

accounting consequence for an issuer that
Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Rules and Regulations 20023

enters into a binding contract with a holder

of the issuer’s debt obligation to exchange

that security at a future date for specified

amount may be subject to conflicting

literature. The staff intends to request that

the Emerging Issues Task Force address that

issue.

[FR Doc. 95–9981 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations Nos. 4 and 16]

RIN 0960–AD63

Testing Modifications to the Disability

Determination Procedures

AGENCY: Social Security Administration

(SSA).

ACTION: Final rules.

SUMMARY: We are adding new rules

which provide authority to test

procedures that modify the disability

determination process we currently

follow under titles II and XVI of the

Social Security Act (the Act). We intend

to test up to four model procedures

either singly or in combination. These

tests will provide us with information

so we can determine the effectiveness of

the models in improving the disability

process. The intended result is to enable

us to make recommendations for

national implementation of

improvements identified by the tests.

These final rules only refer to the

changes to the disability procedures we

may test. Unless specified, all other

regulations related to the disability

determination process remain

unchanged. Videoconferencing may be

used with any of the models.

EFFECTIVE DATE: These rules are effective

April 24, 1995.

FOR FURTHER INFORMATION CONTACT:

Henry D. Lerner, Legal Assistant, Office

of Regulations, Social Security

Administration, 6401 Security Blvd.,

Baltimore, MD 21235, (410) 965–1762.

SUPPLEMENTARY INFORMATION:

Background

We published a notice of proposed

rulemaking (NPRM) in the Federal

Register on October 22, 1993, (58 FR

54532) proposing to establish the

authority to test model projects

designed to improve the disability

determination process. The initial

public comment period was 30 days. A

30-day extension of the public comment

period was published in the Federal

Register on December 6, 1993, (58 FR

64207) and the comment period ended

on January 5, 1994. The comments we

received on the NPRM and the changes

we have made in the final rules are

discussed below.

On April 15, 1994, the Social Security

Administration (SSA) published a

notice in the Federal Register (59 FR

18188) setting out a proposal to redesign

the initial and administrative appeals

system for determining an individual’s

entitlement to Social Security and

Supplementary Security Income (SSI)

disability payments. Comments on this

comprehensive and far reaching

proposal developed by SSA’s Disability

Process Reengineering Team (the Team)

were requested, and during the

comment period that began on April 1,

1994, and ended on June 14, 1994, SSA

received over 6,000 written responses.

They came from a broad spectrum of

respondents including: Professional

associations, claimant representatives,

claimant advocacy groups, Federal and

State agencies, State governments,

employee unions, Federal and State

employees, and other members of the

public. Comments also were received by

members of the Team who conducted

briefings and spoke with more than

3,000 individuals about their reaction to

the proposal. The commenters

expressed their belief that

improvements were needed to provide

better service and to manage the claims

process more effectively. While some

concerns were expressed, the

commenters praised SSA and the Team

for taking on the task of redesigning the

disability claim process.

The Team made revisions to the

redesign proposal and submitted them

to the Commissioner of Social Security

on June 30, 1994. The Commissioner

accepted the recommendations of the

Team on September 7, 1994, with the

full understanding that certain aspects

of the redesign proposal recommended

by the Team would require extensive

research and testing to determine

whether they can be implemented. The

plan approved by the Commissioner

was published in the Federal Register

on September 19, 1994 (59 FR 47887).

The proposed changes to the disability

determination process contained in the

plan approved by the Commissioner

that are the same as or similar to

changes we proposed to test in the

NPRM include:

• Making the process more

personalized by assigning a disability

claim manager who is knowledgeable

about the case to be the claimant’s

principal contact with SSA;

• Providing the claimant with an

opportunity for a predecision interview

with the decisionmaker(s) when the

decisionmaker finds that the evidence

in the claim file is insufficient to make

a fully favorable determination or

requires an initial determination

denying the claim;

• Eliminating the reconsideration

step of the administrative review

process and providing a claimant who is

dissatisfied with his or her initial

determination with the opportunity to

request a hearing before an

administrative law judge (ALJ).

These final rules were developed

based on the NPRM, the comments we

received on it which are discussed

below, and the Commissioner’s

acceptance on September 7, 1994, of the

Team’s recommendations to redesign

the disability process. Under the final

rules we plan to test one or more

modifications to the current disability

determination process to determine

whether the modifications should

become permanent. The modifications

we plan to test pursuant to these final

rules that were not contained in the

NPRM, are based on, and are an

outgrowth of, the NPRM.

Some modifications of procedures

that were in the NPRM, such as having

a single decisionmaker in the proposed

claims intake and determination model,

the face-to-face predenial interview

model and the face-to-face Federal

reconsideration models, are now found

in these final rules in the single

decisionmaker model. Also, a

modification similar to, though less

formal than, the predenial interview

concept that was part of the face-to-face

predenial interview model is now found

in the predecision interview model.

Other modifications contained within

the models described in the NPRM and

the redesign proposal are now combined

in models in these final rules. For

example, the NPRM described a

disability specialist as a claims

representative who would be given

special disability program training

similar to the training that State agency

disability examiners receive. The

disability specialist would be able to

review the claim before forwarding it to

the State agency, request and evaluate

existing medical evidence and, if

appropriate, arrange for a consultative

examination. With respect to

applications for SSI payments based on

disability, the disability specialist

would, where appropriate, make

presumptive disability findings. The

second model in the NPRM, the claims

intake and determination model,

described a process whereby the

applicant would be interviewed by a

decisionmaker when a claim for

disability benefits or SSI payments

based on disability was filed.