Page 10 - FINAL CFA I SLIDES JUNE 2019 DAY 9
P. 10
Session Unit 8:
31. Non-Current (Long-Term) Liabilities
LOS 31.c: Explain the de-recognition of debt, p.279
tanties
Financial statements affected Say interest rates have fallen, surplus cash from Discount/premium
(check IFRS/US GAAP) operations, asset disposals or equity issuance. fully amortised;
Loss or Gain is recognised, e.g., say. BV = FV = CFF (outflow)
• Par value of bond = $1 million
• Book Value at year 2 = $995,000
• Redeem at 102% of Par (= $1,020,000 )
If issuance costs were capitalized, any • Loss of $25,000 ($995,000 – $1,020,000
remaining unamortized costs
must be written-off and included in the Charged to income statement –
gain or loss calculation. Can you detect impact D/A; D/E?
No separate entry is necessary if the In cash flow statement affected?
issuance costs were accounted for in • Gain/loss subtracted from (added to) net income to get CFO.
the initial bond liability, as no • Redemption price is CCF (outflows)
separate asset representing
unamortized issuance costs would
have been created.
