Callable Bonds

Callable bonds can be retired before maturity at the option of the issuing corporation. The call price is usually an amount greater than the face value of the bonds, so the corporation usually recognizes a loss on the retirement of bonds. An extraordinary gain can be recognized on the early extinguishment of debt when a company purchases its bonds on the open market at a price below carrying value. This happens when a rise in the market interest rate causes the market value of the bonds to fall.

• Call Price
• Early Extinguishment of Debt