The May 9, 2006, edition of the Wall Street Journal carried the following headline:

The related article explained that UAL Corporation, parent company of United Airlines, reported first quarter net income of almost \($23\) billion thanks to a \($24\) billion gain from “discharging its obligations to unsecured creditors in exchange for giving them 115 million UAL common shares.” Without the noncash gain, UAL would have reported a net loss of \($306\) million. UAL emerged from bankruptcy in February 2006. UAL common shares traded at \($39\) per share prior to the May 9, 2006, announcement. Discuss the financial effects of UAL'’s exchange of its stock for its unsecured debt. What was the market value of the UAL stock given to creditors? What was the book value of the UAL debt?

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Accounting Gain Masks UAL Loss of $306 Million