Noncurrent Liabilites Flashcards
Main Co. issued bonds with detachable common stock warrants. Only the warrants had a known fair value. The sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds. This excess is reported as
The proceeds from the issuance of a debt security with detachable stock purchase warrants are allocated between the debt securities and the warrants. If the fair values of the debt securities and the warrants are known, the allocation should be based on their relative fair values. When the fair value of the warrants but not the debt is known, the proceeds should be allocated to the stock warrants based on their fair value, with the remainder allocated to the bonds. If, after the allocation to the warrants based on their fair value, the face amount of the bonds exceeds the proceeds allocated to the bonds, the excess should be reported as a discount on the bonds payable.
Discount on note
Discount or premium is not an asset or liability separable from the related note. A discount or premium should therefore be reported in the balance sheet as a direct reduction of or addition to the face amount of the note.
