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Doubt on Premium on redemption

This topic has 4 replies, 3 voices, and was last updated 10 months ago by P2-D2.

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December 10, 2023 at 11:29 am #696550
roha0210
Participant
- Topics: 5
- Replies: 2
Hi,
Where do take the premium on maturity of a debenture, do we take it to SFP or SPL and under which account?
December 13, 2023 at 1:26 pm #696715
P2-D2
Keymaster
- Topics: 4
- Replies: 7054
Hi,
You are looking at amortised cost accounting treatment in this instance. The premium is included as part of the effective rate of interest in the debenture. To account for this we will apply the percentage to the outstanding balance and assuming that we have issued the debenture we would DR Finance costs (SPL) CR Debentures (SFP).
Thanks
December 13, 2023 at 6:55 pm #696730
barbjohn
Participant
- Topics: 0
- Replies: 43
Chris, am I not right that, if a Share Premium Account exists, one of the few allowable uses of the Share Premium Account is to provide for the premium payable on the redemption of shares and / or debentures.
Is that right?
December 19, 2023 at 4:15 pm #697057
roha0210
Participant
- Topics: 5
- Replies: 2
@barbjohn yes even I have the same question
December 22, 2023 at 3:12 pm #697270
P2-D2
Keymaster
- Topics: 4
- Replies: 7054
No, the share premium account would be used primarily when we have a bonus issue of shares where we DR Share Premium CR Share Capital with the nominal value.
The premium on redemption of a bond is dealt with using the amortised cost method of accounting.
Thanks
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