liabillities fixed as

7/23/2019 liabillities fixed as

http://slidepdf.com/reader/full/liabillities-fixed-as 1/75



Matakuliah: 0054F/Akuntansi Keuangan II

Non Current LiabilitiesWeek 2



C H A P T E RC H A P T E R 1414

NON-CURRENT LIABILITIESNON-CURRENT LIABILITIES

Intermediate AccountingIFRS Edition

Kieso, Weygandt, and Warfield



1. Describe the form! "roce#$res ssocite# %ith iss$i&' !o&'-term#ebt.

(. I#e&tif) *rio$s t)"es of bo&# iss$es.

+. Describe the cco$&ti&' *!$tio& for bo&#s t #te of iss$&ce.

4. A""!) the metho#s of bo&# #isco$&t &# "remi$m morti,tio&.

. E"!i& the cco$&ti&' for !o&'-term &otes ")b!e.

/. Describe the cco$&ti&' for the eti&'$ishme&t of &o&-c$rre&t

!ibi!ities.

0. Describe the cco$&ti&' for the fir *!$e o"tio&.

. E"!i& the re"orti&' of off-b!&ce-sheet fi&&ci&' rr&'eme&ts.

2. I&#icte ho% to "rese&t &# &!),e &o&-c$rre&t !ibi!ities.

Ler&i&' Ob3ecti*esLer&i&' Ob3ecti*es

Ler&i&' Ob3ecti*esLer&i&' Ob3ecti*es



Bo&#s P)b!eBo&#s P)b!eLo&'-TermLo&'-TermNotes P)b!eNotes P)b!e

S"eci! Iss$esS"eci! Iss$es

Iss$i&' bo&#sIss$i&' bo&#s

T)"es &# rti&'sT)"es &# rti&'s

!$tio&!$tio&

Effecti*e-i&terestEffecti*e-i&terest

metho#metho#

Notes iss$e# t fceNotes iss$e# t fce*!$e*!$e

Notes &ot iss$e# t fceNotes &ot iss$e# t fce*!$e*!$e

S"eci! sit$tio&sS"eci! sit$tio&s

5ort''e &otes ")b!e5ort''e &otes ")b!e

Eti&'$ishme&tsEti&'$ishme&ts

6ir *!$e o"tio&6ir *!$e o"tio&

Off-b!&ce-sheetOff-b!&ce-sheetfi&&ci&'fi&&ci&'

Prese&ttio& &# &!)sisPrese&ttio& &# &!)sis

Lo&'-Term Libi!itiesLo&'-Term Libi!ities

Lo&'-Term Libi!itiesLo&'-Term Libi!ities



Bo&#s P)b!eBo&#s P)b!e

Bo&#s P)b!eBo&#s P)b!e

No&-c$rre&t !ibi!ities 7!o&'-term #ebt8 co&sist of & e"ecte#o$tf!o% of reso$rces risi&' from "rese&t ob!i'tio&s tht re

&ot ")b!e %ithi& )er or the o"erti&' c)c!e of the

com"&)9 %hiche*er is !o&'er.

LO 1 Describe the formal procedures associated with issuing long-term debt.

Em"!es:

; Bo&#s ")b!e

;Lo&'-term &otes ")b!e

; 5ort''es ")b!e

; Pe&sio& !ibi!ities

; Lese !ibi!ities

Lo&'-term #ebt hs *rio$s co*e&&ts or restrictio&s.



Iss$i&' Bo&#sIss$i&' Bo&#sIss$i&' Bo&#sIss$i&' Bo&#s

LO 1 Describe the formal procedures associated with issuing long-term debt.

Bo&# co&trct <&o%& s bo&# i&#e&t$re.

Re"rese&ts "romise to "):

718 s$m of mo&e) t #esi'&te# mt$rit) #te9 "!$s

7(8 "erio#ic i&terest t s"ecifie# rte o& the mt$rit)mo$&t 7fce *!$e8.

P"er certificte9 t)"ic!!) =19>>> fce *!$e.

I&terest ")me&ts $s$!!) m#e semi&&$!!).

Use# %he& the mo$&t of c"it! &ee#e# is too !r'e for o&e

!e&#er to s$""!).



T)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#s

LO 2 Identify various types of bond issues.

Commo& t)"es fo$&# i& "rctice:

Sec$re# &# U&sec$re# 7#ebe&t$re8 bo&#s.

Term9 Seri!9 &# C!!b!e bo&#s.

Co&*ertib!e9 Commo#it)-Bc<e#9 Dee"-Disco$&t bo&#s.

Re'istere# &# Berer 7Co$"o&8 bo&#s.

I&come &# Re*e&$e bo&#s.



T)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#sT)"es &# Rti&'s of Bo&#s

LO 2 Identify various types of bond issues.

Cor"orte bo&# !isti&'.

Com"&)Com"&)

NmeNme

I&terest rte "i# sI&terest rte "i# s

? of "r *!$e ? of "r *!$e

Price s ? of "r Price s ? of "r

I&terest rte bse# o& "riceI&terest rte bse# o& "rice

Cre#it%orthi&essCre#it%orthi&ess



!$tio& of Bo&#s P)b!e!$tio& of Bo&#s P)b!e!$tio& of Bo&#s P)b!e!$tio& of Bo&#s P)b!e

LO 3 Describe the accounting valuation for bonds at date of issuance.

Iss$&ce &# mr<eti&' of bo&#s to the "$b!ic:

Us$!!) t<es %ee<s or mo&ths.

Iss$i&' com"&) m$st

; Arr&'e for $&#er%riters.

; Obti& re'$!tor) ""ro*! of the bo&# iss$e9

$&#er'o $#its9 &# iss$e "ros"ect$s.

; H*e bo&# certifictes "ri&te#.





Se!!i&' "rice of bo&# iss$e is set b) the

s$""!) &# #em&# of b$)ers &# se!!ers9

re!ti*e ris<9

mr<et co&#itio&s9 &#

stte of the eco&om).

I&*estme&t comm$&it) *!$es bo&# t the "rese&t *!$e of its

e"ecte# f$t$re csh f!o%s9 %hich co&sist of 718 i&terest &# 7(8

"ri&ci"!.



I&terest Rte

Stte#9 co$"o&9 or &omi&! rte @ Rte %ritte& i& the terms

of the bo&# i&#e&t$re.

Bo&# iss$er sets this rte.

Stte# s "erce&t'e of bo&# fce *!$e 7"r8.

5r<et rte or effecti*e )ie!# @ Rte tht "ro*i#es &

cce"tb!e ret$r& comme&s$rte %ith the iss$ers ris<.

Rte of i&terest ct$!!) er&e# b) the bo&#ho!#ers.





Ho% #o )o$ c!c$!te the mo$&t of i&terest tht is ct$!!) "i#to the bo&#ho!#er ech "erio#

Ho% #o )o$ c!c$!te the mo$&t of i&terest tht is ct$!!)

recor#e# s i&terest e"e&se b) the iss$er of the bo&#s



7Stte# rte 6ce !$e of the bo&#8

75r<et rte Crr)i&' !$e of the bo&#8



Bo&#s So!# At5r<et I&terest

/?

?

1>?

Premi$m

Pr !$e

Disco$&t


LO 3

Ass$me Stte# Rte of ?



I!!$strtio&: S&tos Com"&) iss$es =1>>9>>> i& bo&#s #te#&$r) 19 (>119 #$e i& fi*e )ers %ith 2 "erce&t i&terest

")b!e &&$!!) o& &$r) 1. At the time of iss$e9 the mr<et

rte for s$ch bo&#s is 2 "erce&t.


Bo&#s Iss$e# t Pr Bo&#s Iss$e# t Pr Bo&#s Iss$e# t Pr Bo&#s Iss$e# t Pr

I!!$strtio& 14-1



I!!$strtio& 14-1



I!!$strtio& 14-(



o$r&! e&tr) o& #te of iss$e9 &. 19 (>11.


Csh 1>>9>>>

Bo&#s ")b!e 1>>9>>>

o$r&! e&tr) to recor# ccr$e# i&terest t Dec. +19 (>11.

Bo&# i&terest e"e&se 29>>>

Bo&# i&terest ")b!e 29>>>

o$r&! e&tr) to recor# first ")me&t o& &. 19 (>1(.


Csh 29>>>

LO 3



I!!$strtio&: Ass$mi&' &o% tht S&tos iss$es =1>>9>>> i&bo&#s9 #$e i& fi*e )ers %ith 2 "erce&t i&terest ")b!e

&&$!!) t )er-e&#. At the time of iss$e9 the mr<et rte for

s$ch bo&#s is 11 "erce&t.


Bo&#s Iss$e# t Disco$&tBo&#s Iss$e# t Disco$&tBo&#s Iss$e# t Disco$&tBo&#s Iss$e# t Disco$&t

I!!$strtio& 14-+



I!!$strtio& 14-+



I!!$strtio& 14-4



o$r&! e&tr) o& #te of iss$e9 &. 19 (>11.


Csh 2(9/>

Bo&#s ")b!e 2(9/>

o$r&! e&tr) to recor# ccr$e# i&terest t Dec. +19 (>11.Bo&# i&terest e"e&se 1>910


Bo&#s ")b!e 1910

o$r&! e&tr) to recor# first ")me&t o& &. 19 (>1(.


Csh 29>>>

LO 3



he& bo&#s se!! t !ess th& fce *!$e:

; I&*estors #em&# rte of i&terest hi'her th& stte# rte.

; Us$!!) occ$rs bec$se i&*estors c& er& hi'her rte o&

!ter&ti*e i&*estme&ts of e$! ris<.; C&&ot ch&'e stte# rte so i&*estors ref$se to ") fce

*!$e for the bo&#s.

; I&*estors recei*e i&terest t the stte# rte com"$te# o&

the fce *!$e9 b$t the) ct$!!) er& t & effecti*e rte

bec$se the) "i# !ess th& fce *!$e for the bo&#s.





Bo&# iss$e# t #isco$&t - mo$&t "i# t mt$rit) is moreth& the iss$e mo$&t.

Bo&#s iss$e# t "remi$m - com"&) ")s !ess t mt$rit)

re!ti*e to the iss$e "rice.

A#3$stme&t to the cost is recor#e# s bo&# i&terest e"e&se o*er

the !ife of the bo&#s thro$'h "rocess c!!e# morti,tio&.

Re$ire# "roce#$re for morti,tio& is the effecti*e-i&terestmetho# 7!so c!!e# "rese&t *!$e morti,tio&8.

LO !pply the methods of bond discount and premium amorti"ation.

Effecti*e-I&terest 5etho#Effecti*e-I&terest 5etho#Effecti*e-I&terest 5etho#Effecti*e-I&terest 5etho#



Effecti*e-i&terest metho# "ro#$ces "erio#ic i&terest e"e&see$! to co&st&t "erce&t'e of the crr)i&' *!$e of the

bo&#s.



I!!$strtio& 14-





Bo&#s Iss$e# t Disco$&t

I!!$strtio& 14-/

I!!$strtio&: E*ermster Cor"ortio& iss$e# =1>>9>>> of ? term

bo&#s o& &$r) 19 (>119 #$e o& &$r) 19 (>1/9 %ith i&terest

")b!e ech $!) 1 &# &$r) 1. I&*estors re$ire & effecti*e-

i&terest rte of 1>?. C!c$!te the bo&# "rocee#s.



LO


I!!$strtio& 14-0



LO


I!!$strtio& 14-0

o$r&! e&tr) o& #te of iss$e9 &. 19 (>11.

Csh 2(9(0

Bo&#s ")b!e 2(9(0



LO


I!!$strtio& 14-0

Bo&# i&terest e"e&se 49/14

Bo&#s ")b!e /14

Csh 49>>>

o$r&! e&tr) to recor# first ")me&t &# morti,tio& of the

#isco$&t o& $!) 19 (>11.



LO


I!!$strtio& 14-0

o$r&! e&tr) to recor# ccr$e# i&terest &# morti,tio& of the

#isco$&t o& Dec. +19 (>11.

Bo&# i&terest e"e&se 49/4


Bo&#s ")b!e /4



I!!$strtio&: E*ermster Cor"ortio& iss$e# =1>>9>>> of ? term

bo&#s o& &$r) 19 (>119 #$e o& &$r) 19 (>1/9 %ith i&terest

")b!e ech $!) 1 &# &$r) 1. I&*estors re$ire & effecti*e-

i&terest rte of /?. C!c$!te the bo&# "rocee#s.



Bo&#s Iss$e# t Premi$m

I!!$strtio& 14-



LO


I!!$strtio& 14-2



LO


I!!$strtio& 14-2

o$r&! e&tr) o& #te of iss$e9 &. 19 (>11.

Csh 1>9+>

Bo&#s ")b!e 1>9+>



LO


I!!$strtio& 14-2

Bo&# i&terest e"e&se +9(/

Bo&#s ")b!e 044

Csh 49>>>

o$r&! e&tr) to recor# first ")me&t &# morti,tio& of the

"remi$m o& $!) 19 (>11.



ht h""e&s if E*ermster "re"res fi&&ci! stteme&ts t the

e&# of 6ebr$r) (>11 I& this cse9 the com"&) "rortes the

"remi$m b) the ""ro"rite &$mber of mo&ths to rri*e t the

"ro"er i&terest e"e&se9 s fo!!o%s.



Accr$e# I&terest

I!!$strtio& 14-1>



E*ermster recor#s this ccr$! s fo!!o%s.



Accr$e# I&terestI!!$strtio& 14-1>

Bo&# i&terest e"e&se 19>.++

Bo&#s ")b!e (4.>>

Bo&# i&terest ")b!e 19+++.++



Bo&# i&*estors %i!! ") the se!!er the i&terest ccr$e#

from the !st i&terest ")me&t #te to the #te of iss$e.

O& the &et semi&&$! i&terest ")me&t #te9 bo&#i&*estors %i!! recei*e the f$!! si mo&ths i&terest ")me&t.



Bo&#s Iss$e# bet%ee& I&terest Dtes



I!!$strtio&: Ass$me E*ermster iss$e# its fi*e-)er bo&#s9 #te#

&$r) 19 (>119 o& 5) 19 (>119 t "r 7=1>>9>>>8. E*ermster

recor#s the iss$&ce of the bo&#s bet%ee& i&terest #tes s

fo!!o%s.



Csh 1>>9>>>

Bo&#s ")b!e 1>>9>>>

Csh (9//0

Bo&# i&terest e"e&se (9//0

7=1>>9>>> .> 4F1(8 @ =(9//0

Bo&#s Iss$e# t Pr



O& $!) 19 (>119 t%o mo&ths fter the #te of "$rchse9

E*ermster ")s the i&*estors si mo&ths i&terest9 b) m<i&'

the fo!!o%i&' e&tr).

LO



Csh 49>>>

7=1>>9>>> .> 1F(8 @ =49>>>

Bo&#s Iss$e# t Pr



Bo&#s Iss$e# t Disco$&t or Premi$m



I!!$strtio&: Ass$me tht the E*ermster ? bo&#s %ere iss$e#

o& 5) 19 (>119 to )ie!# /?. Th$s9 the bo&#s re iss$e# t

"remi$m "rice of =1>9>+2. E*ermster recor#s the iss$&ce of

the bo&#s bet%ee& i&terest #tes s fo!!o%s.

Csh 1>9>+2

Bo&#s ")b!e 1>9>+2

Csh (9//0

Bo&# i&terest e"e&se (9//0






E*ermster the& #etermi&es i&terest e"e&se from the #te of

s!e 75) 19 (>1189 &ot from the #te of the bo&#s 7&$r) 19

(>118.

I!!$strtio& 14-1(






The "remi$m morti,tio& of the bo&#s is !so for o&!) t%o

mo&ths.

I!!$strtio& 14-1+






E*ermster therefore m<es the fo!!o%i&' e&tries o& $!) 19 (>119

to recor# the i&terest ")me&t &# the "remi$m morti,tio&.


Csh 49>>>

Bo&#s ")b!e (+Bo&# i&terest e"e&se (+



Lo&'-Term Notes P)b!eLo&'-Term Notes P)b!eLo&'-Term Notes P)b!eLo&'-Term Notes P)b!e

Acco$&ti&' is Simi!r to Bo&#s

A &ote is *!$e# t the "rese&t *!$e of its f$t$re i&terest

&# "ri&ci"! csh f!o%s.

Com"&) morti,es &) #isco$&t or "remi$m o*er the!ife of the &ote.

LO # $%plain the accounting for long-term notes payable.



BE14-2: Co!#%e!!9 I&c. iss$e# =1>>9>>>9 4-)er9 1>? &ote tfce *!$e to 6!i&t Hi!!s B&< o& &$r) 19 (>119 &# recei*e#

=1>>9>>> csh. The &ote re$ires &&$! i&terest ")me&ts ech

December +1. Pre"re Co!#%e!!s 3o$r&! e&tries to recor# 78 the

iss$&ce of the &ote &# 7b8 the December +1 i&terest ")me&t.

Notes Iss$e# t 6ce !$eNotes Iss$e# t 6ce !$eNotes Iss$e# t 6ce !$eNotes Iss$e# t 6ce !$e

78 Csh 1>>9>>>

Notes ")b!e 1>>9>>>

7b8 I&terest e"e&se 1>9>>>Csh 1>9>>>

7=1>>9>>> 1>? @ =1>9>>>8




Notes Not Iss$e# t 6ce !$eNotes Not Iss$e# t 6ce !$eNotes Not Iss$e# t 6ce !$eNotes Not Iss$e# t 6ce !$e

Iss$i&' com"&) recor#s the #iffere&ce bet%ee& the fce

mo$&t &# the "rese&t *!$e 7csh recei*e#8 s

#isco$&t &#

morti,es tht mo$&t to i&terest e"e&se o*er the !ife

of the &ote.


Gero-I&terest-Beri&' Notes



BE14-1>: Smso& Cor"ortio& iss$e# 4-)er9 =09>>>9 ,ero-

i&terest-beri&' &ote to Bro%& Com"&) o& &$r) 19 (>119 &#

recei*e# csh of =409//+. The im"!icit i&terest rte is 1(?. Pre"re

Smso&s 3o$r&! e&tries for 78 the &. 1 iss$&ce &# 7b8 the

Dec. +1 reco'&itio& of i&terest.

LO #

Gero-I&terest-Beri&' NotesGero-I&terest-Beri&' NotesGero-I&terest-Beri&' NotesGero-I&terest-Beri&' Notes



78 Csh 409//+

Notes ")b!e 409//+

7b8 I&terest e"e&se 90(> Notes ")b!e 90(>

7=409//+ 1(?8


Gero-I&terest-Beri&' NotesGero-I&terest-Beri&' NotesGero-I&terest-Beri&' NotesGero-I&terest-Beri&' Notes

BE14-1>: Smso& Cor"ortio& iss$e# 4-)er9 =09>>>9 ,ero-

i&terest-beri&' &ote to Bro%& Com"&) o& &$r) 19 (>119 &#

recei*e# csh of =409//+. The im"!icit i&terest rte is 1(?. Pre"re

Smso&s 3o$r&! e&tries for 78 the &. 1 iss$&ce &# 7b8 the

Dec. +1 reco'&itio& of i&terest.



I&terest-Beri&' NotesI&terest-Beri&' NotesI&terest-Beri&' NotesI&terest-Beri&' Notes

BE14-11: 5cCormic< Cor"ortio& iss$e# 4-)er9 =4>9>>>9 ? &ote

to ree&b$sh Com"&) o& &. 19 (>119 &# recei*e# com"$ter

tht &orm!!) se!!s for =+1942. The &ote re$ires &&$! i&terest

")me&ts ech Dec. +1. The mr<et rte of i&terest is 1(?. Pre"re

5cCormic<s 3o$r&! e&tries for 78 the &. 1 iss$&ce &# 7b8 the

Dec. +1 i&terest.

LO #



I&terest-Beri&' NotesI&terest-Beri&' NotesI&terest-Beri&' NotesI&terest-Beri&' Notes

78 Csh +1942

Notes ")b!e +1942

7b8 I&terest e"e&se +9002

Csh (9>>>

Notes ")b!e 19002

LO #



Notes Iss$e# for Pro"ert)9 oo#s9 or Ser*ices

S"eci! Notes P)b!e Sit$tio&sS"eci! Notes P)b!e Sit$tio&sS"eci! Notes P)b!e Sit$tio&sS"eci! Notes P)b!e Sit$tio&s


718 No i&terest rte is stte#9 or

7(8 The stte# i&terest rte is $&reso&b!e9 or

7+8 The fce mo$&t is mteri!!) #iffere&t from the c$rre&t csh"rice for the sme or simi!r items or from the c$rre&t fir *!$e

of the #ebt i&str$me&t.

he& ech&'i&' the #ebt i&str$me&t for "ro"ert)9 'oo#s9 or

ser*ices i& br'i&e# tr&sctio&9 the stte# i&terest rte is

"res$me# to be fir $&!ess:



If com"&) c&&ot #etermi&e the fir *!$e of the "ro"ert)9

'oo#s9 ser*ices9 or other ri'hts9 &# if the &ote hs &o re#)

mr<et9 the com"&) m$st ""roimte & ""!icb!e i&terest

rte.



Choice of rte is ffecte# b):

; Pre*i!i&' rtes for simi!r i&str$me&ts.

; 6ctors s$ch s restricti*e co*e&&ts9 co!!ter!9 ")me&t

sche#$!e9 &# the eisti&' "rime i&terest rte.

Choice of I&terest Rtes





I!!$strtio&: O& December +19 (>119 $&#er!ich Com"&) iss$e# "romissor) &ote to Bro%& I&teriors Com"&) for rchitect$r!

ser*ices. The &ote hs fce *!$e of =>9>>>9 #$e #te of

December +19 (>1/9 &# bers stte# i&terest rte of ( "erce&t9

")b!e t the e&# of ech )er. $&#er!ich c&&ot re#i!) #etermi&ethe fir *!$e of the rchitect$r! ser*ices9 &or is the &ote re#i!)

mr<etb!e. O& the bsis of $&#er!ichs cre#it rti&'9 the bse&ce of

co!!ter!9 the "rime i&terest rte t tht #te9 &# the "re*i!i&'

i&terest o& $&#er!ichs other o$tst&#i&' #ebt9 the com"&) im"$tes

& "erce&t i&terest rte s ""ro"rite i& this circ$mst&ce.





I!!$strtio& 14-1

I!!$strtio& 14-1/





$&#er!ich recor#s iss$&ce of the &ote o& Dec. +19 (>119 i&")me&t for the rchitect$r! ser*ices s fo!!o%s.

B$i!#i&' 7or Co&str$ctio& i& Process8 419(+2

Notes P)b!e 419(+2





I!!$strtio& 14-(>

P)me&t of first )ers i&terest &# morti,tio& of the #isco$&t.

I&terest e"e&se ++942

Notes P)b!e ((942

Csh 119>>>



A "romissor) &ote sec$re# b) #oc$me&t c!!e# mort''etht "!e#'es tit!e to "ro"ert) s sec$rit) for the !o&.

5ort''e Notes P)b!e5ort''e Notes P)b!e5ort''e Notes P)b!e5ort''e Notes P)b!e


5ost commo& form of !o&'-term &otes ")b!e.

P)b!e i& f$!! t mt$rit) or i& i&st!!me&ts.

6ie#-rte mort''e.

rib!e-rte mort''es.



Rec$isitio& "rice Net crr)i&' mo$&t @ Loss

Net crr)i&' mo$&t Rec$isitio& "rice @ i&

At time of rec$isitio&9 $&morti,e# "remi$m or #isco$&t

m$st be morti,e# $" to the rec$isitio& #te.

Eti&'$ishme&t of No&-C$rre&t Libi!itiesEti&'$ishme&t of No&-C$rre&t Libi!itiesEti&'$ishme&t of No&-C$rre&t Libi!itiesEti&'$ishme&t of No&-C$rre&t Libi!ities

LO & Describe the accounting for e%tinguishment of non-current liabilities.

Eti&'$ishme&t %ith Csh before 5t$rit)



I!!$strtio&: E*ermster bo&#s iss$e# t #isco$&t o& &$r) 19

(>11. These bo&#s re #$e i& fi*e )ers. The bo&#s h*e "r *!$e

of =1>>9>>>9 co$"o& rte of ? "i# semi&&$!!)9 &# %ere so!# to

)ie!# 1>?.

Eti&'$ishme&t of DebtEti&'$ishme&t of DebtEti&'$ishme&t of DebtEti&'$ishme&t of Debt

I!!$strtio& 14-(1



T%o )ers fter the iss$e #te o& &$r) 19 (>1+9 E*ermster c!!s

the e&tire iss$e t 1>1 &# c&ce!s it.

Eti&'$ishme&t of DebtEti&'$ishme&t of DebtEti&'$ishme&t of DebtEti&'$ishme&t of Debt

I!!$strtio& 14-((

E*ermster recor#s the rec$isitio& &# c&ce!!tio& of the bo&#s

Bo&#s ")b!e 2(92(

Loss o& eti&'$ishme&t of bo&#s /9>0

Csh 1>19>>>

LO &



Cre#itor sho$!# cco$&t for the &o&-csh ssets or e$it)

i&terest recei*e# t their fir *!$e.

Debtor reco'&i,es 'i& e$! to the ecess of the

crr)i&' mo$&t of the ")b!e o*er the fir *!$e of the

ssets or e$it) tr&sferre#.



Eti&'$ishme&t b) Ech&'i&' Assets orSec$rities



I!!$strtio&: Hmb$r' B&< !o&e# J(>9>>>9>>> to Bo&&

5ort''e Com"&). Bo&&9 i& t$r&9 i&*este# these mo&ies i&

resi#e&ti! "rtme&t b$i!#i&'s. Ho%e*er9 bec$se of !o%

occ$"&c) rtes9 it c&&ot meet its !o& ob!i'tio&s. Hmb$r'

B&< 'rees to cce"t from Bo&& 5ort''e re! estte %ith

fir *!$e of J1/9>>>9>>> i& f$!! sett!eme&t of the J(>9>>>9>>>

!o& ob!i'tio&. The re! estte hs crr)i&' *!$e of

J(19>>>9>>> o& the boo<s of Bo&& 5ort''e. Bo&& 7#ebtor8

recor#s this tr&sctio& s fo!!o%s.


Note P)b!e to Hmb$r' B&< (>9>>>9>>>

Loss o& Dis"ositio& of Re! Estte 9>>>9>>>

Re! Estte (19>>>9>>>

i& o& Eti&'$ishme&t of Debt 49>>>9>>>LO &





Eti&'$ishme&t %ith 5o#ifictio& of TermsCre#itor m) offer o&e or combi&tio& of the fo!!o%i&'

mo#ifictio&s:

1. Re#$ctio& of the stte# i&terest rte.(. Ete&sio& of the mt$rit) #te of the fce mo$&t of the

#ebt.

+. Re#$ctio& of the fce mo$&t of the #ebt.

4. Re#$ctio& or #eferr! of &) ccr$e# i&terest.





I!!$strtio&: O& December +19 (>1>9 5or'& Ntio&! B&< e&ters i&to #ebt mo#ifictio& 'reeme&t %ith Resorts De*e!o"me&t Com"&)9

%hich is e"erie&ci&' fi&&ci! #iffic$!ties. The b&< restr$ct$res

=1>9>>9>>> !o& recei*b!e iss$e# t "r 7i&terest "i# to #te8 b):

; Re#$ci&' the "ri&ci"! ob!i'tio& from =1>9>>9>>> to=29>>>9>>>K

; Ete&#i&' the mt$rit) #te from December +19 (>1>9 to

December +19 (>14K &#

; Re#$ci&' the i&terest rte from the historic! effecti*e rte of 1(

"erce&t to "erce&t. i*e& Resorts De*e!o"me&ts fi&&ci!

#istress9 its mr<et-bse# borro%i&' rte is 1 "erce&t.





I6RS re$ires the mo#ifictio& to be cco$&te# for s &

eti&'$ishme&t of the o!# &ote &# iss$&ce of the &e% &ote9

mes$re# t fir *!$e.I!!$strtio& 14-(+





The 'i& o& the mo#ifictio& is =+9(29//49 %hich is the #iffere&ce

bet%ee& the "rior crr)i&' *!$e 7=1>9>>9>>>8 &# the fir *!$e of

the restr$ct$re# &ote9 s com"$te# i& I!!$strtio& 14-(+ 7=09(>19++/8.

Resorts De*e!o"me&t m<es the fo!!o%i&' e&tr) to recor# the

mo#ifictio&.

Note P)b!e 7O!#8 1>9>>9>>>

i& o& Eti&'$ishme&t of Debt +9(29//4

Note P)b!e 7Ne%8 09(>19++/





Amorti,tio& sche#$!e for the &e% &ote.I!!$strtio& 14-(4



6ir !$e O"tio&6ir !$e O"tio&6ir !$e O"tio&6ir !$e O"tio&

LO ' Describe the accounting for the fair value option.

Com"&ies h*e the o"tio& to recor# fir *!$e i& their cco$&tsfor most fi&&ci! ssets &# !ibi!ities9 i&c!$#i&' bo&#s &# &otes

")b!e.

The IASB be!ie*es tht fir *!$e mes$reme&t for fi&&ci!

i&str$me&ts9 i&c!$#i&' fi&&ci! !ibi!ities9 "ro*i#es more re!e*&t&# $&#erst&#b!e i&formtio& th& morti,e# cost.



6ir !$e O"tio&6ir !$e O"tio&6ir !$e O"tio&6ir !$e O"tio&

LO ' Describe the accounting for the fair value option.

No&-c$rre&t !ibi!ities re recor#e# t fir *!$e9 %ith $&re!i,e#

ho!#i&' 'i&s or !osses re"orte# s "rt of &et i&come.

6ir !$e 5es$reme&t

I!!$strtio&s: E#mo&#s Com"&) hs iss$e# J>>9>>> of / "erce&t

bo&#s t fce *!$e o& 5) 19 (>1>. E#mo&#s chooses the fir

*!$e o"tio& for these bo&#s. At December +19 (>1>9 the *!$e of

the bo&#s is &o% J4>9>>> bec$se i&terest rtes i& the mr<et

h*e i&crese# to "erce&t.

Bo&#s P)b!e (>9>>>

U&re!i,e# Ho!#i&' i& or LossI&come (>9>>>



Off-b!&ce-sheet fi&&ci&' is & ttem"t to borro%mo&ies i& s$ch %) to "re*e&t recor#i&' the

ob!i'tio&s.

Off-B!&ce-Sheet 6i&&ci&'Off-B!&ce-Sheet 6i&&ci&'Off-B!&ce-Sheet 6i&&ci&'Off-B!&ce-Sheet 6i&&ci&'

LO ( $%plain the reporting of off-balance-sheet financing arrangements.

Differe&t 6orms:

; No&-Co&so!i#te# S$bsi#ir)

; S"eci! P$r"ose E&tit) 7SPE8

; O"erti&' Leses



Note #isc!os$res 'e&er!!) i&#icte the &t$re of the !ibi!ities9

mt$rit) #tes9 i&terest rtes9 c!! "ro*isio&s9 co&*ersio&

"ri*i!e'es9 restrictio&s im"ose# b) the cre#itors9 &# ssets

#esi'&te# or "!e#'e# s sec$rit).

6ir *!$e of the #ebt sho$!# be #isc!oses.

5$st #isc!ose f$t$re ")me&ts for si&<i&' f$&# re$ireme&ts

&# mt$rit) mo$&ts of !o&'-term #ebt #$ri&' ech of the

&et fi*e )ers.

LO ) Indicate how to present and analy"e non-current liabilities.

Prese&ttio& &# A&!)sisPrese&ttio& &# A&!)sisPrese&ttio& &# A&!)sisPrese&ttio& &# A&!)sis

Prese&ttio& of No&-C$rre&t Libi!ities



A&!)sis of No&-C$rre&t Libi!itiesT%o rtios tht "ro*i#e i&formtio& bo$t #ebt-")i&' bi!it)

&# !o&'-r$& so!*e&c) re:

Tot! #ebt

Tot! ssets

Debt to tot!ssets @

The hi'her the "erce&t'e of #ebt to tot! ssets9 the 'reter

the ris< tht the com"&) m) be $&b!e to meet its mt$ri&'

ob!i'tio&s.

1.1.





A&!)sis of Lo&'-Term DebtT%o rtios tht "ro*i#e i&formtio& bo$t #ebt-")i&' bi!it)

&# !o&'-r$& so!*e&c) re:

I&come before i&come tes &#i&terest e"e&se

I&terest e"e&se

Timesi&terester&e#

@

I&#ictes the com"&)s bi!it) to meet i&terest ")me&ts sthe) come #$e.

(.(.





I!!$strtio&: No*rtis hs tot! !ibi!ities of =(09/( mi!!io&9 tot!ssets of =09(22 mi!!io&9 i&terest e"e&se of =(2> mi!!io&9

i&come tes of =19++/ mi!!io&9 &# &et i&come of =9(++ mi!!io&.

e com"$te No*rtiss #ebt to tot! ssets &# times i&terest

er&e# rtios s sho%&

I!!$strtio& 14-(





; I6RS re$ires tht the c$rre&t "ortio& of !o&'-term #ebt be c!ssifie# s c$rre&t $&!ess & 'reeme&t to

refi&&ce o& !o&'-term bsis is com"!ete# before the re"orti&' #te. U.S. AAP re$ires com"&ies toc!ssif) s$ch refi&&ci&' s c$rre&t $&!ess it is com"!ete# before the fi&&ci! stteme&ts re iss$e#.

; Both I6RS &# U.S. AAP re$ire the best estimte of "robb!e !oss. U&#er I6RS9 if r&'e of estimtes

is "re#icte# &# &o mo$&t i& the r&'e is more !i<e!) th& &) other mo$&t i& the r&'e9 the Mmi#-"oi&t

of the r&'e is $se# to mes$re the !ibi!it). I& U.S. AAP9 the mi&im$m mo$&t i& r&'e is $se#.



; U.S. AAP $ses the term co&ti&'e&c) i& #iffere&t %) th& I6RS. A co&ti&'e&c) $&#er U.S. AAP m)

be re"orte# s !ibi!it) $&#er certi& sit$tio&s. I6RS #oes &ot "ermit co&ti&'e&c) to be recor#e# s

!ibi!it).

; I6RS $ses the term "ro*isio&s to #isc$ss *rio$s !ibi!it) items tht h*e some $&certi&t) re!te# to timi&'

or mo$&t. U.S. AAP 'e&er!!) $ses term !i<e estimte# !ibi!ities to refer to "ro*isio&s.

; Both I6RS &# U.S. AAP "rohibit the reco'&itio& of !ibi!ities for f$t$re !osses. I& 'e&er!9 restr$ct$ri&'

costs re reco'&i,e# er!ier $&#er I6RS.

; I6RS &# U.S. AAP re simi!r i& the tretme&t of e&*iro&me&t! !ibi!ities Ho%e*er9 the reco'&itio&

criteri for e&*iro&me&t! !ibi!ities re more stri&'e&t $&#er U.S. AAP: E&*iro&me&t! !ibi!ities re &ot

reco'&i,e# $&!ess there is "rese&t !e'! ob!i'tio& &# the fir *!$e of the ob!i'tio& c& be reso&b!)

estimte#.



; I6RS re$ires tht #ebt iss$e costs re recor#e# s re#$ctio&s i& the crr)i&' mo$&t of the #ebt. U&#er

U.S. AAP9 com"&ies recor# these costs i& bo&# iss$&ce cost cco$&t &# morti,e these costs o*er

the !ife of the bo&#s.

; U.S. AAP $ses the term tro$b!e# #ebt restr$ct$ri&'s &# #e*e!o"s reco'&itio& r$!es re!te# to this

cte'or). I6RS 'e&er!!) ss$mes tht !! restr$ct$ri&'s sho$!# be co&si#ere# eti&'$ishme&ts of #ebt.

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liabillities fixed as