2 Flashcards
these bonds have a detachable coupon for each interest payment.
Bearer bonds. These bonds can be freely transferred and have a detachable coupon for each interest payment.
IFRSs accounting for initial measurement of convertible debt.
Equity allocated a residual. Under IFRS, when a debt instrument has liability and equity components, the issuer allocates to the liability component its fair value. The equity component is allocated the residual amount of the proceeds.
GAAP accounting for initial measurement of convertible debt.
Debt and equity inseparable. Under GAAP, the debt and equity elements of convertible debt are treated as inseparable.
GAAP accounting when warrants are detachable.
Relative fair-value method. When debt is issued with detachable warrants, the proceeds must be allocated between the underlying debt and the warrants based on their relative fair values at the time of issuance.
Which of the following statements characterizes convertible debt?
Since the debt and the conversion option of convertible debt are inseparable, no portion of the proceeds from the issuance of convertible debt securities is to be accounted for as attributable to the conversion feature
does any long term loan can be considered short term?
yes , when Current liabilities represent obligations whose liquidation is expected to require the use of current assets or the creation of other current liabilities. Current liabilities also include long-term obligations that are or will be callable by the creditor because the debtor has violated a covenant in the debt agreement. The “other bank loan” matures in 6 months from the balance sheet date and is a current liability.
A company is obligated to pay a specified amount to a supplier even if it does not take delivery of the contracted goods. This type of commitment is:
not reported on the balance sheet but disclosed in the notes to the financial statements.
