In this tough business environment, sometimes the easiest way to deal with overwhelming financial challenges is to walk away. As interest rates rise and demand for certain goods and services slackens, some companies might find that their existing debt obligations are simply too much to deal with.

That situation leaves organizations looking for alternatives to paying off the debt directly, choosing bankruptcy or another debt forgiveness approach such as consolidation, or loan modification.

In fact, bankruptcy is a step that a growing number of companies are taking. Commercial Chapter 11 filings grew 105% from May 2022 to May 2023, according to research by Epiq Bankruptcy. Corporate bankruptcies reached a 12-year high at the beginning of 2023, according to S&P Global Market Intelligence.

But modifying or canceling debt can come with a range of tax issues—especially with regard to taxes for cancellation of debt income (CODI) and companies may end up unexpectedly owing money on discharged debt.

Businesses that are seeking a debt cancellation or modification need to be aware of the potential for different tax treatment, depending on how the deal is structured, Jennifer Galstad-Lee, senior manager of tax at GRF CPAs & Advisors, told CFO Brew.

“Watch out for how things can be classified for tax purposes,” she said, adding “tax planning wherever debt is forgiven can be very important.”

Continue reading.—SW

Digital finance is an essential cog in pretty much every business machine, but what does the future of digital finance hold? What’s the good, the rad, and the developing?

Plaid Threads is covering it all on June 22 at their highly anticipated virtual event. Customers and decision-makers will gather to hear from Plaid execs (including their CEO, CTO, and chief privacy officer) on topics like:

• fraud prevention
• risk prediction
• how fintechs and enterprise companies can win more customers

Get access to the latest Plaid products and exciting updates designed to help build the future of finance—and arrive at it seamlessly.

Save your seat by registering ASAP.

The World Bank released its Global Economic Prospects for 2024—and it’s not looking good.

For all the economic turmoil brought on by the pandemic, the World Bank expects new hazards to continue exacerbating economic uncertainty. Per the international development organization’s report, the global economy will likely continue to slow this year, on account of inflation, Russia’s invasion of Ukraine, and ongoing pandemic effects.

Global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023, according to the organization’s projections. It’ll make a “tepid recovery” to 2.4% in 2024, as long as banking sector stress and “inflation pressures” don’t spill over into emerging markets and developing economies (EMDEs).

“Many developing economies are struggling to cope with weak growth, persistently high inflation, and record debt levels. Yet new hazards—such as the possibility of more widespread spillovers from renewed financial stress in advanced economies—could make matters even worse for them,” Ayhan Kose, deputy chief economist of the World Bank, said in a statement.

The report analyzed how rising US interest rates have impacted EMDEs worldwide. The recent rise in two-year Treasury yields has been associated with “adverse financial effects” in those markets and economies, including an increased likelihood of financial crisis.

Continue reading.—NP

We now know a bit more about the mysterious whistleblower who was awarded a record $279 million from the Securities and Exchange Commission in May.

According to the Wall Street Journal, the whistleblower assisted in an alleged bribery case against Swedish telecommunications firm Ericsson, “people familiar with the matter” said. The SEC hasn’t announced which case the settlement was for, due to whistleblower protection rules, but Ericsson settled bribery charges with the US government in 2019 for $1.1 billion.

The settlement combined a $540 million disgorgement of illicit profits and a $520 million criminal penalty, related to activities in China, Djibouti, Indonesia, Kuwait, and Vietnam between 2000 and 2016.

The award, announced by the SEC announced last month, unseated a previous record of $114 million awarded to a whistleblower in 2020.

Would-be whistleblowers, the SEC notes, must “voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action, and adhere to filing requirements in the whistleblower rules.”

Keep reading.—SW

Today’s top finance reads.

Stat: 5. That’s how many consecutive quarters productivity has fallen, the longest period of decline ever recorded. There are lots of potential reasons for the decline, but we’re sure it doesn’t have anything to do with our midday Netflix binges. (Business Insider)

Quote: “Rays of sunshine in the global economy we saw earlier in the year have been fading, and gray days likely lie ahead.”—Ayhan Kose, deputy chief economist at the World Bank Group. The World Bank warned of sluggish economic growth amid high borrowing costs and banking woes. (the New York Times)

Read: Navigating the culture wars is getting riskier, and more important, for companies these days. (the Wall Street Journal)

Thriving against odds: Weathering economic uncertainty requires a finance team with a growth mindset. Workday + Fortune will host a webinar with top CFOs who’ve empowered their teams to focus on growth and innovation. Register here.*

Start small: Finance pros, your basic skills now include data science. Get the full story on how AI and automation are changing the financial future in the latest CFO Brew article, sponsored by Brex.*

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