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Financial instruments – convertible debentures – ACCA Financial Reporting (FR)

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Comments

  1. Hi Chris, thank you so much for your lectures God bless you!
    I have a question on the Proceeds
    Why are we multiplying the $1M by 100? I would’ve assumed we’d do
    1,000,000 x 1,000,000
    Let me know where I’m going wrong
    Thanks!!!!

  5. Hy Chris,
    I just want to thank you for these beautiful lectures 🙂
    I now find FR so easy and clear all because of you thank you soooo much from the bottom of my heart! 🙂 you are seriously the best :))

  6. Hi Chris,

    Love your lecture. You make everything so clear and easy to understand.

    I would like to ask how about the entry after three years with converting as equity and if not. If the debentures have not convert as equity, what is the treatment for the 5.3M equity?

    Thank with love

  7. Hi Chris,

    Loving your delivery of these lectures. Nice to hear a familiar accent too given I’m from Manchester but living in Australia.

    Where exactly would the 5.3m equity from Yr1 sit in the SFP? Under ‘other’ in the equity section or as a liability?

    Thanks

    Jonathan

    • Hi Jonathan,

      It would sit in the equity section, usually under the title ‘Equity option on convertible’ or something along those lines.

      Hope Australia is fun.

      Thanks

      Chris

    • Hi,

      It has been explained in the video, and is effectively saying that if we were to borrow this amount as pure debt, then the interest rate on it would be the market rate of interest.

      Thanks

  9. Hi

    I just would like to say that I wouldn’t solve any of the examples provided in the study text of BPP without your lecture – the presentation there is rather complicated. Thanks to your job I’m able to solve them all and even if I make a mistake I am able to figure out why. THANK YOU for your time and commitment.

    • Hi Anna,

      It’s a pleasure to be able to help and even better when we receive comments like yours above. You’ve made the start to my Sunday morning a very rewarding one, thank you!

      Good luck with the rest of the studies and if you get stuck then you know where we are to ask any questions.

      Thanks

      Chris

  12. Why do we take the market rate of interest in discounting the bond. Is there any logic or its just a rules based approach.

    Also when we do the subsequent measurement, we again use the market rate for Interest charge, while coupon rate is something very low.

    In regular bonds we use the market rate for interest charge because bonds are issued at discount paid at premium, all these costs are incorporated in that market rate and so we use that as interest rate or finance cost of the year.

    But what is the reason for using the market rate as finance cost for convertible bonds.

    • Hi,

      It is because we are looking at the substance of the transaction and if we hadn’t issued the debt with the conversion option then the rate of interest would have been the market rate on just the debt alone.

      The coupon rate will be below the market rate as the bond is convertible to equity and therefore the investor can get higher returns in the future from the shares to compensate for the lower coupon rate.

      Thanks

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