Vancouver, British Columbia--(Newsfile Corp. - May 9, 2014) - Davidson & Company LLP, a full-service chartered accounting firm located in downtown Vancouver, has released the second educational video in the new video series, called "Ask Bahar", which deals with financial and accounting issues regularly encountered by public companies. In the current video, Davidson & Company's Bahar Saadat and Erez Bahar discuss convertible debentures.
A convertible debenture is a type of security issued by a company in return for a loan to the company by an investor. It is different from a regular debenture in that it can be converted into stock of that company, most commonly at the option of the holder. By adding the convertibility option the issuer pays a lower interest rate on the loan compared to if there was no option to convert. In the event the company does well resulting in an increased share price, it would be beneficial for the holder to convert the debenture to common shares.
Under IFRS, the Company is required to disclose the value of the debt and equity portions of the convertible debenture separately, this separation is known as bifurcation. The debt is initially measured at its fair value based on the present value of cash flows which takes into account the interest expense, market interest rate and maturity date of the debt. Accretion expense is recorded each period to bring the value of the bond to its face value at the maturity date.
This video can be viewed at InvestmentPitch.com. If this link is not enabled, please visit www.InvestmentPitch.com and enter "Davidson" in the search box.
If you cannot view the video above, please visit:
http://www.investmentpitch.com/video/0_sjuy7po6/Davidson-Company--Ask-Bahar--Convertible-Debentures
This installment and others are available for viewing on http://www.davidson-co.com/videos/.
Needless to say, accounting for convertible debentures is a complex area of financial reporting and should be discussed with a professional accountant.
About Davidson & Company LLP
Davidson & Company LLP, a full-service chartered accounting firm located in downtown Vancouver. They are the proud auditors of over 350 public companies trading on the various exchanges around the world, whose sectors include natural resources, technology, and real estate. Their full-serve tax department also offers the full gamut of services for your business or personal needs. One of the largest independent firms in British Columbia, they are also affiliated with Nexia International, one of the world`s largest accounting networks. For more information email askbahar@davidson-co.com.
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