Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A changeable instrument is deemed part liability and part equity. IAS 32 necessitate that each part is measured individually on initial recognition. The liability element is measured by estimating the present value of the future cash flows from the instrument (interest and potential redemption) using a discount rate equal to the market rate of interest for a similar instrument with no conversion terms. The equity element is subsequently the balance, calculated as follows: $
PV of the principal amount $10m at 7% redeemable in 5 yrs
$10m x 0.713
7,130,000
PV of the interest annuity at 7% for 5 yrs
(5% x $10m) x 4.100
2,050,000
Total value of liability element
9,180,000
Equity element (balancing figure)
820,000
Total proceeds raised
10,000,000
The equity will not be remeasured, however the liability element will be subsequently remeasured at amortised cost using the effective interest rate of 7%. The total finance cost for the year ended 31 December 2010 is $642,600 (7% x 9,180,000). The coupon rate of interest of 5% has already been charged to profit or loss in the year so a further $142,600 should be recorded:
Dr Finance costs $142,600
Cr Non-current liability $142,600
(b) Preference shares
The substance of the instrument is a debt instrument. IAS 32 requires that any instrument that contains an obligation to transfer economic benefit be classified as a liability. The cumulative nature of the returns on the predilection shares means that the outflow of benefit is inevitable. The predilection shares would then be classified as debt and would in fact increase the gearing of the entity.
i. To disengage government from economic or business activities in which it has no competence or in areas where the private sector is more competent. ii. To make the enterprises a
According to the Solow model, how would each of the following affect consumption per worker in the long run (i.e. in the steady state)? Draw a figure and explain. a. The destruc
What are some critics by individuals and professional bodies in this joint project?
Calculation of Efficiency ratios - 2008 2009 2010 M Net Sales
State the relationship between return and risk This relationship between return and risk has significant implications for setting financial objectives for a business. Owners wil
SMALL BANKRUPTCIES The court may order the estate of a debtor to be administered summarily, if the debtor's assets are not likely to exceed Shs 12,000 in value. This is known
what managers should know about internal rate of return( IRR) and why
Q. A case study on TIMBERTOPS? Cost of capital Use Ke = Do (1 + g)/ Po + g where g = br Retention rate b = 245 ÷ 442 = 55% Return on capital r = 442 ÷ (1,932 -
Question 1 The following information should be used for questions #1 through #7: Jersies, Inc financial statement data. 2009 2010
Q. Ownership and Control related issue of debt? Issuing equity is able to have ownership implications for a company particularly if the finance is raised by a placing or offer
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd