long-term debt called back by a company before the maturity date. This may occur when the interest rate on the debt exceeds the current prevailing interest rate. The difference between the cash paid and the carrying value of the bond is treated as an extraordinary loss or gain. There is one exception. The gain or loss is an ordinary item if the extinguishment of debt was made to satisfy a SINKING FUND requirement that must be met within one year of the date of extinguishment.