BUS 321 Lecture Notes - Lecture 2: Effective Interest Rate, Cash Flow, Interest Rate
Document Summary
=> ifrs reclassify entire to current if covenant broken + possibility being called. => aspe remain long term if small likelihood covenant broken + creditor waived right to call. Bond: investors pay up front for right receive periodic payments (interest) + return of capital (face value) at end (maturity) Written contract (bond indenture): amount repaid at maturity + periodic interest. Investment grade securities = high quality = greater capital access. Effective interest (ifrs): different amount each period, constant interest rate (market rate) Straight line (aspe): constant amount each period, prefer in theory if need simplicity + no gaap. Not include debt premiums /discounts, financing/holding costs. Immediately recognize in ni or add to carrying value and amortized over life. Off balance sheet financing: borrowing arrangements not recorded improve financial ratios (debt- equity ratio) Special purpose entities (spe) or variable interest entities (vie) Fair value option: long-term debt generally measured at amortized cost.