1. A compound financial instrument contains both debt and equity elements, such as a convertible bond. IAS 32 requires separating compound instruments into their debt and equity components.
2. To split the components, the present value of future cash flows for the debt is calculated using market rates for similar non-convertible debt. The equity portion equals total proceeds minus the debt value.
3. Transaction costs are allocated propotionally to the debt and equity amounts. The components are accounted for separately over time, and both are extinguished if conversion occurs through issuance of shares.
IFRS 15 - the new revenue recognition standard EY Belgium
The IASB and the FASB have jointly issued a new revenue standard, IFRS 15 Revenue from Contracts with Customers, which will replace the existing IFRS and US GAAP revenue guidance.Find out more in our comprhensive brochure.
IFRS 15 - the new revenue recognition standard EY Belgium
The IASB and the FASB have jointly issued a new revenue standard, IFRS 15 Revenue from Contracts with Customers, which will replace the existing IFRS and US GAAP revenue guidance.Find out more in our comprhensive brochure.
Safaricom marketing mix and it's environmentFred Mmbololo
Marketing plays a fundamental role in enhancing a company’s growth and performance in capturing new markets, retaining the market and stimulating financial strengths in income returns of an organization.
Safaricom marketing mix and it's environmentFred Mmbololo
Marketing plays a fundamental role in enhancing a company’s growth and performance in capturing new markets, retaining the market and stimulating financial strengths in income returns of an organization.
ALPFA National Convention KPMG Case Competitionricaurte
This is the PowerPoint for my team's case presentation. My part was on the Financial Analysis. The tables had each column appearing one-at-a-time, so that it was easier for people to follow what I was saying, and the boxes with a white border were the points I briefly talked about.
Magic Blades stock has risen rapidly to $50 per share. Th.docxsmile790243
Magic Blade's stock has risen rapidly to $50 per share. The increase is due to excitement about its new knife
that uses a light beam to slice fruits and vegetables. This process enhances the final appearance and quality
of salads and fruit trays.
The board of directors is considering strategies to divide the corporate ownership into more shares of stock,
and bring about some reduction in the price per share. They are considering a stock split, small stock dividend,
or large stock dividend. The board is unsure of the accounting effects of such transactions, and has requested
information about how stockholders' equity would be impacted.
Prior to the contemplated stock transaction, equity consisted of:
Stockholders’ Equity
Common stock, $2 par value, 2,000,000 shares authorized,
500,000 shares issued and outstanding $1,000,000
Paid-in capital in excess of par 2,000,000
Retained earnings 6,000,000
Total stockholders’ equity $9,000,000
(a) Assuming the board were to declare a 2 for 1 split, how would the revised stockholders' equity
appear?
(b) Assuming the board were to declare a 15% stock dividend, how would the revised stockholders'
equity appear?
B-14.07 Stock dividends and splits
x
SPREADSHEET
TOOL:
Holding a
cell reference
constant
Mike
Highlight
Summary information for Branford Corporation's balance sheet follows:
BRANFORD CORPORATION
Balance Sheet
August 15, 20X4
Assets
Cash $ 125,000
Accounts receivable 250,000
Inventory 750,000
Property, plant, & equipment (net) 860,000
Total assets $1,985,000
Liabilities
Accounts payable $125,000
Accrued liabilities 260,000
Notes payable 290,000
Total liabilities $ 675,000
Stockholders’ equity
Common stock, $5 par $700,000
Paid-in capital in excess of par 300,000
Retained earnings 310,000
Total stockholders’ equity 1,310,000
Total liabilities and equity $1,985,000
Branford's business is growing rapidly, and the company needs to expand its manufacturing facilities. This
expansion will require the company to obtain an additional $1,000,000 in cash. The company is exploring
five alternatives to obtain the necessary capital:
Equity structure and impact I-14.01
Mike
Highlight
366 | CHAPTER 14
DEBT OPTION:
Branford is able to borrow, on a 5-year note, the full amount needed. The interest rate on
this note would be 7%, and the note would require monthly payments.
COMMON STOCK OPTION:
Branford has identified an investor who is willing to pay $1,000,000 for 40,000 newly is-
sued common shares. Common shares have been paying a dividend of $0.50 per share.
Branford anticipates that this dividend rate will be maintained.
NONCUMULATIVE PREFERRED STOCK OPTION:
Branford has identified a hedge fund that will pay $1,000,000 for 8% noncumulative
preferred stock to be issued at par.
CUMULATIVE PREFERRED STOCK OPTION:
Branford has identified an insurance company that will pay $1,000,000 for 6% cumulative
preferred ...
1 Time Value of MoneyMilestone One Time Value of Money (please fi.docxmonicafrancis71118
1 Time Value of MoneyMilestone One: Time Value of Money (please fill in YELLOW cells) Explanations:Interest Rate8% FCF (Free Cash Flows) is the net change in cash generated by the operations of a business during a reporting period, minus cash outlays for working capital, capital expenditures, and dividends during the same period. This is a strong indicator of the ability of an entity to remain in business.
Note: For Milestone One, please use the Free Cash Flows from the United Parcel Service 2017 Annual Report for the years 2015, 2016, and 2017 located on Page 2 of the Report.
FCF - YearsFCF - 2015FCF - 2016FCF - 2017Amounts*6,0826,0073,573Pv*(5,631.48)(5,150.03)(2,836.36)Total Pv*(13,617.88)*In millionsInterest Rate (given) - For purposes of this exercise, use 8% interest rate. Pv=FVN/(1+I)^NPV(I,N,0,FV)With 10% decrease in FCFInterest Rate8%FCF - YearsFCF - 2015FCF - 2016FCF - 2017Amounts*5,4745,4063,216Pv*(5,068.33)(4,635.03)(2,552.73)Total Pv*(12,256.09)*In millions
2 Stock and Bond ValuationMilestone Two: Stock Valuation and Bond Issuance (fill in the YELLOW cells) PART I: STOCK VALUATIONDividend from Financial Statements:Read the Explanations to the right of the calculation cells for specific information on the data.Explanations:Year Cash Div/share ($)Dividend YieldStockholder's Equity (in millions)Stock PriceNote:
1. The dividends declared and paid by UPS for 2015, 2016, and 2017 are found on the second page of the 2017 UPS Annual Report.
2. The dividend yield for 2015, 2016, and 2017 are found on the second page of the 2017 UPS Annual Report.
3. Stockholder's/Shareholder's equity for 2015, 2016, and 2017 are found on the second page of the UPS Annual Report. 20152.923.00%2,49197.333333333320163.122.70%429115.555555555620173.322.60%1,030127.69230769231. Stock Valuation - The new dividend yield if the company increased its dividend per share by 1.75Year Cash Div/Share ($) +1.75Dividend YieldStockholder's Equity (in millions)Stock PriceDividend Yield - annual cash dividend per share of common stock divided by the market price of a share of the common stock. (Dividend yield = Annual Dividend/Current Stock Price)
Note: Current Stock Price is not part of the Financial Statements - calculated using the formula for Dividend Yield20154.674.80%2,49197.333333333320164.874.21%429115.555555555620175.073.97%1,030127.69230769232. The dividend yield if the firm doubled it's outstanding sharesYear Cash Div/Share ($) Dividend YieldStockholder's Equity (in millions) -doubledStock PriceStockholder's Equity = Assets - Liabilities. This represents the ownership of a corporations. Owners are called stockholder because they hold stocks or share of the company. The main goal of every corporate manager is to generate shareholder value. .
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
NO1 Uk Rohani Baba In Karachi Bangali Baba Karachi Online Amil Baba WorldWide...Amil baba
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
1. 1
IAS 32 FINANCIAL INSTRUMENTS: PRESENTATION
A compound financial instrument is a financial instrument that has the characteristics of
both an equity and liability (debt). An example would be a bond that can be converted
into shares. It doesn't matter whether the bondholders will ultimately opt for conversion.
As long as there is the option to convert into shares, the financial instrument would carry
an equity component.
IAS 32 Financial Instruments: Presentation requires compound financial instruments to
be split into their component parts, i.e.:
a financial liability (the debt component); and
an equity instrument (the option to convert into shares).
These must be shown separately in the financial statements.
To illustrate this requirement, let's say Entity A issued a $10 million convertible bond at
par. On initial recognition, the bond should be measured at the fair value of
consideration received, i.e. $10 million. However, the financial instrument needs to be
split into its debt and equity components. The double entry would therefore be:
Dr Cash $10 million
Cr Liability - Bond ?
Cr Equity ?
Splitting the financial instrument
The financial instrument is split by first determining the debt component. The debt
component is calculated as the present value of future cash flows of the instrument
discounted using the current interest rate for similar bonds without the conversion rights.
The equity component is then calculated by deducting the debt component from the
proceeds of the instrument.
Any transaction costs are then apportioned to the debt and equity components in
proportion to the allocation of proceeds.
2. 2
Illustration 1 (without transaction costs)
On 1 January 20X4, Enzer issued a $50 million three-year convertible bond at par with
the following terms:
There were no issue costs
The coupon rate is 10%, payable annually in arrears on 31 December
The bond is redeemable at par on 1 January 20X7
Bondholders may opt for conversion. The terms of the conversion are two 25 cents
shares for every $1 owed to each bondholder on 1 January 20X7
Bonds issued by similar companies without any conversion rights currently bear interest
at 15%.
Required:
How should the bond be accounted for by Enzer assuming:
(a) The bondholders opt for conversion
(b) The bondholders opt for cash payment
Solution
This is a compound financial instrument. Enzer is required to present the debt and
equity components of the instrument separately in the financial statements.
The debt component is calculated as the present value of future cash flows of the bond
discounted using the current interest rate for similar bonds without the conversion rights.
The debt and equity components of the instrument are determined as follows:
Year ended Cash
flow
Discount
factor
Present
value
@ 15%
$000 $000
31 December
20X4
5,000 1/1.15 4,348
31 December
20X5
5,000 1/1.152
3,781
31 December
20X6
55,000 1/1.153
36,163
Debt component 44,292
Proceeds of 50,000
3. 3
issue
Equity
component
5,708
Therefore, on initial recognition, Enzer should account for the instrument as follows:
$000
Dr Cash 50,000
Cr Liability - Bond 44,292
Cr Equity 5,708
Subsequent to initial recognition, the debt component is a normal liability and should be
measured at amortised cost as follows:
End of Year Opening Effective Cash Closing
balance interest
at 15%
paid balance
$000 $000 $000 $000
31 December
20X4
44,292 6,644 (5,000) 45,936
31 December
20X5
45,936 6,890 (5,000) 47,826
31 December
20X6
47,826 7,174 (5,000) 50,000
The carrying amounts at 1 January 20X7 are:
$000
Equity 5,708
Liability - Bond 50,000
55,708
On conversion
Number of shares issued ($50 million x 2 shares) = 100 million shares.
The value of shares issued is 100 million shares x 25c = $25 million.
The remaining $30,708,000 should be classified as share premium.
The following entries should be made:
4. 4
$000
Dr Equity 5,708
Dr Liability - Bond 50,000
Cr Share capital 25,000
Cr Share premium 30,708
Note: Both the equity and liability components are extinguished by the issue of shares.
On redemption
The liability of $50 million will be extinguished by cash payment. The equity component
will remain within equity, as a non-distributable reserve.
The following entries should be made:
$000
Dr Liability - Loan 50,000
Cr Cash 50,000
Illustration 2 (without transaction costs)
On 1 January 20X4, Enzer issued a $50 million three-year convertible bond at par with
the following terms:
Issue costs amounted to $500,000
The coupon rate is 10%, payable annually in arrears on 31 December
The bond is redeemable at par on 1 January 20X7
Bondholders may opt for conversion. The terms of the conversion are two 25 cents
shares for every $1 owed to each bondholder on 1 January 20X7
Bonds issued by similar companies without any conversion rights currently bear interest
at 15%
The impact of the issue costs is to increase the effective interest rate to 15.425%
Required:
How should the bond be accounted for by Enzer assuming:
(a) The bondholders opt for conversion
(b) The bondholders opt for cash payment
Solution
Enzer is required to present the debt and equity components of the instrument
separately in the financial statements.
5. 5
The debt component is calculated as the present value of future cash flows of the bond
discounted using the current interest rate for similar bonds without the conversion rights.
The debt and equity components of the instrument are determined as follows:
Year ended Cash
flow
Discount
factor
Present
value
@ 15%
$000 $000
31 December
20X4
5,000 1/1.15 4,348
31 December
20X5
5,000 1/1.152
3,781
31 December
20X6
55,000 1/1.153
36,163
Debt component 44,292
Proceeds of
issue
50,000
Equity
component
5,708
The issue costs would be allocated to the debt and equity components in proportion to
the allocation of proceeds.
Debt Equity Total
$000 $000 $000
Proceeds 44,292 5,708 50,000
Issue costs (443) (57) (500)
43,849 5,651 49,500
Therefore, on initial recognition, Enzer should account for the instrument as follows:
$000
Dr Cash 50,000
Cr Liability - Bond 44,292
Cr Equity 5,708
$000
Dr Liability - Bond 443
Dr Equity 57
Cr Cash 500
Subsequent to initial recognition, the debt component is a normal liability and should be
measured at amortized cost as follows:
6. 6
End of Year Opening Effective Cash Closing
balance interest
at
15.425%
paid balance
$000 $000 $000 $000
31 December
20X4
43,849 6,764 (5,000) 45,613
31 December
20X5
45,613 7,036 (5,000) 47,649
31 December
20X6
47,649 7,351 (5,000) 50,000
The carrying amounts at 1 January 20X7 are:
$000
Equity 5,651
Liability - Bond 50,000
55,651
On conversion
Number of shares issued ($50 million x 2 shares) = 100 million shares.
The value of shares issued is 100 million shares x 25c = $25 million.
The remaining $30,651,000 should be classified as share premium.
The following entries should be made:
$000
Dr Equity 5,651
Dr Liability - Bond 50,000
Cr Share capital 25,000
Cr Share premium 30,651
Note: Both the equity and liability components are extinguished by the issue of shares.
On redemption
The liability of $50 million will be extinguished by cash payment. The equity component
will remain within equity, as a non-distributable reserve.
7. 7
The following entries should be made:
$000
Dr Liability - Loan 50,000
Cr Cash 50,000
Important points to note:
Note that if the bondholders opt for conversion, both liability and equity will be
extinguished as the equity component will be converted into shares. However, if the
bondholders opt for cash redemption, then only the liability component will be
extinguished because there are no shares being issued, hence the equity component
will not be converted. In this case, the equity component will remain as a non-
distributable reserve, i.e. it cannot be used as a reserve from which dividends are paid.