Headquartered in Montreal, Canada, Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops and markets prescription and non-prescription pharmaceuticals, principally in the areas of dermatology and neurology. The company is the langest pharmaceutical company in Canada with a portfolio of more than 500 products and 400 employees involved in R\&D activities. The company is listed on both the NYSE and the Toronto Stock Exchange. Its 2012 income statement reported the following line item:

Required

a. What is a loss on extinguishment of debt? Why does such a loss arise?

b. How does the company calculate the loss on extinguishment of debt?

c. Would we categorize this income statement item as operating or nonoperating?

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($000s) Loss of extinguishment on debt... 2012 2011 2010 $(20,080) $(36,844) $(32,413)