Bonds and Debt Restructure Flashcards
How are bonds classified?
Typically as Held to Maturity (HTM)
Bonds classified as trading securities need to be reported at FMV with g/l flowing through I/S
What is the bond to stock Book Value Method
No recognized gain/loss
Use APIC as the plug for the difference between the bonds book value and par value of common stock
What is the diffeerence between stated rate and market rate
Stated rate is the coupon rate, payments needed to be made
Market rate is the rate desired by investors
How to recognize a gain on debt restructuring
Gain is recognized as the difference between Cash paid and Carrying Amount of the debt
How does a creditor recognize a loss on debt restructuring
Recognize a loan impairment loss by discounting the new loan as the effective interest rate (coupon rate)
