This chapter determine the initial recognition, initial measurement and subsequent measurement of bonds; describe the effective interest method and calculate interest expense, amortization of bond discounts/premiums, and interest payments; explain the derecognition of debt; | Chapter 10 NONCURRENT (LONG-TERM) LIABILITIES Presenter’s name Presenter’s title dd Month yyyy LEARNING OUTCOMES Determine the initial recognition, initial measurement and subsequent measurement of bonds. Describe the effective interest method and calculate interest expense, amortization of bond discounts/premiums, and interest payments. Explain the derecognition of debt. Describe the role of debt covenants in protecting creditors. Describe the financial statement presentation of and disclosures relating to debt. Explain motivations for leasing assets instead of purchasing them. Distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee. Determine the initial recognition, initial measurement, and subsequent measurement of finance leases. Compare the disclosures relating to finance and operating leases. Compare the presentation and disclosure of defined contribution and defined benefit pension plans. Calculate and interpret leverage and coverage ratios. 1 Bonds: contents Pricing of debt based on present value of future cash payments. How an issuer accounts for debt: Issued at par Issued at a price other than par Issuance, periodic interest payments, repayment Role of debt covenants in protecting creditors. Copyright © 2013 CFA Institute 2 LOS. Determine the initial recognition, initial measurement, and subsequent measurement of bonds. 2 Bonds: borrowers’ cash flows Copyright © 2013 CFA Institute 3 At issuance (Time 0), borrower receives cash in exchange for bonds. Issue price equals present value of future cash flows. 1 2 3 4 5 Pays periodic interest at the coupon rate. At maturity, pays principal amount. 0 LOS. Determine the initial recognition, initial measurement, and subsequent measurement of bonds. The slide illustrates the timing of the borrowers’ bond-related cash flows. At Time 0 (at issuance), the bond issuer receives cash in exchange for issuing the bond. Subsequently, the issuer pays periodic interest at | Chapter 10 NONCURRENT (LONG-TERM) LIABILITIES Presenter’s name Presenter’s title dd Month yyyy LEARNING OUTCOMES Determine the initial recognition, initial measurement and subsequent measurement of bonds. Describe the effective interest method and calculate interest expense, amortization of bond discounts/premiums, and interest payments. Explain the derecognition of debt. Describe the role of debt covenants in protecting creditors. Describe the financial statement presentation of and disclosures relating to debt. Explain motivations for leasing assets instead of purchasing them. Distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee. Determine the initial recognition, initial measurement, and subsequent measurement of finance leases. Compare the disclosures relating to finance and operating leases. Compare the presentation and disclosure of defined contribution and defined benefit pension plans. Calculate and interpret leverage .
