Debt swaps, carbon credits: FASB races to drop long-awaited accounting rules

Companies may soon get a clearer rulebook for two tricky parts of corporate accounting: how to record major debt do-overs and how to put a price tag on environmental "credits" used to meet pollution rules.

At a meeting of the Financial Accounting Standards Board's (FASB) Oversight Committee on Feb. 20, 2026, Technical Director Jackson Day said the board is wrapping up a final "fatal flaw" review of its narrow standard on debt exchanges-a last check for any major problems before release. He also said a "ballot draft" of the environmental credit standard is being sent to board members for a written vote, the final approval step before an update can be issued. Both updates remain on track for first-quarter issuance, though late-stage reviews can still affect timing.

The rules cover two everyday corporate moves: rewriting debt to ease pressure or cutting interest costs and buying or selling environmental credits to meet emissions requirements. For some firms, accounting can shift reported profits, total debt and key financial ratios investors watch. The FASB's goal is to get everyone using the same playbook, making companies' numbers easier to compare.

The "debt swap" rules: When a redo becomes a brand-new loan

The debt project, which the FASB voted to finalize on Sep. 3, 2025, tackles a question that can materially change a company's financial results:

If a company swaps old debt for new debt around the same time, is that:

• The same loan with tweaks (a modification), or
• A new loan that replaces the old one (an extinguishment)?

Under the approach the FASB has been building, the answer depends on a set of conditions, such as whether the new debt has multiple creditors, whether the old debt was repaid under its contract terms or bought back at market terms and whether the new debt was issued at market terms. The update would be mandatory, not optional. The FASB also dropped an earlier idea that would have required proving the deal followed a "customary

market process."

The FASB also added practical clean-ups, including how to evaluate cash that changes hands in these exchanges and how to treat fees and third-party costs. For certain convertible-debt sweeteners (inducement offers), companies would be told to check the convertible-debt playbook first before applying the debt-exchange rules.