【正文】 par value $1. Convertible Bonds Issued with Conversion Feature Nondetachable and Debt and Equity Not Separated Cash 525,000 Bonds Payable 500,000 Premium on Bonds Payable 25,000 1249 Convertible Bonds Cash 525,000 Discount on Bonds Payable 20,000 Bonds Payable 500,000 PaidIn Capital Arising from Bond Conversion Feature 45,000 Issued with Conversion Feature Nondetachable and Debt and Equity Separated Par value of bonds (500 $1,000) $500,000 Selling price of bonds without conversion feature ($500,000 x ) 480,000 Discount on bonds w/o conversion $ 20,000 1250 Convertible Bonds Cash 525,000 Discount on Bonds Payable 20,000 Bonds Payable 500,000 PaidIn Capital Arising from Bond Conversion Feature 45,000 Issued with Conversion Feature Nondetachable and Debt and Equity Separated Total cash received on sale of bonds $525,000 Selling price of bonds without conversion feature ($500,000 ) 480,000 Amount applicable to conversion $ 45,000 1251 Accounting for Conversion Debt According to IAS 32 ? IAS 32 does not differentiate between convertible debt with nondetachable and detachable conversion features. ? IAS 32 states that for all convertible debt issues, the issuance proceeds should be allocated between debt and equity. 1252 Accounting for Conversion HiTec Co. offers bondholders 40 shares of HiTec Co. mon stock, $1 par, in exchange for each $1,000, 8% bond held. An investor exchanges bonds of $10,000 for 400 shares of mon stock having a market value at the time of the exchange of $26 per share. 1253 Accounting for Conversion Investment in HiTec Co. Common Stock 10,400 Bond Investment— HiTec Co. 9,850 Gain on Conversion of HiTec Co. Bonds 550 Investor’s Books— Gain Recognized Market value of stock issued (400 shares at $26) $10,400 Face value of bonds payable $10,000 Less unamortized discount 150 9,850 Loss to pany on conversion of bonds $ 550 1254 Accounting for Conversion Investor’s Books Investment in HiTec Co. Common Stock (carrying value on books) 9,850 Bond Investment— HiTec Co. 9,850 Bonds Payable 10,000 Loss on Conversion of Bonds 550 Common Stock, $1 par 400 PaidIn Capital in Excess of Par 10,000 Discount on Bonds Payable 150 Issuer’s Books 1255 Bond Refinancing ? Cash for the retirement of a bond issue is frequently raised through the “sale of a new issue” and is referred to as bond refinancing. ? When refinancing before the maturity date of the old issue, the APB selected the immediate recognition of a gain or loss for all early extinguishment of debt. 1256 Fair Value Option ? SFAS No. 159 allows a pany to report, at each balance sheet date, any or all of its financial assets and liabilities at their fair market value on the balance sheet date. ? The FASB reasoned that the objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings. 1257 OffBalanceSheet Financing ? Offbalancesheet financing procedures to avoid disclosing all debt on the balance sheet in order to make the pany’s financial position look stronger. ? Common techniques used: ? Leases ? Unconsolidated subsidiaries ? Variable interest entities (VIEs) ? Joint ventures ? Research and development arrangements ? Project financing arrangements 1258 Leases Leases are considered to be either rentals (operating leases) or asset purchases with borrowed money (capital leases). The four classification criteria are as follows: 1. Lease transfers ownership 2. Lease includes a bargain purchase option 3. Lease covers 75% or more of the economic life of the asset 4. Present value of lease payments is 90% or more of the asset value 1259 Unconsolidated Subsidiaries ? The FASB issued Statement No. 94 in 1987, effectively eliminating one opportunity that panies have used for offbalancesheet financing. ? Companies are able to avoid recognizing debt associated with subsidiaries that are less than 50% owned by the pany. 1260 Joint Ventures ? When panies join forces with other panies to share the costs and benefits associated with specifically defined projects, it is called a joint venture. ? Beca