NONCURRENT LIABILITIES -portion of long term obligations expected to be settled beyond 12 months from the end of the reporting

period and obligations where the enterprise has an unconditional right to defer settlement for more than twelve months after the reporting period. Examples: Long-term bank borrowings, notes, mortgages (related to the general financial condition of the enterprise rather than to the operating cycle), liabilities arising from finance leases which are not due within 12months, deferred income tax liabilities. Bond certificate of indebtedness whereby the borrower agrees to pay a sum of money at a specified future date plus periodic interest payments at the stated rate. Underwriter - a person who resells the bonds to the investing public. Bond Indenture/ Deed of Trust contract between the issuing corporation and the bondholder. It specifies: Terms of the bonds Rights and duties of both parties Restrictions on the issuing party

Unsecured bonds (debentures) are not protected by the pledge of any asset; must have favorable credit standing. Registered Bonds owners names are registered in the books of the issuing corporation. Bearer/Coupon bonds not recorded in the name of the owner. Callable bonds those that give the issuing corporation the right to call or to retire the bond before maturity date. Convertible bonds those that give the bondholders the right to exchange their bond holdings into a specified number of stocks. Zero-interest/Deep-discount bonds are issued at significantly lower than their face value.

Contract/Stated/Nominal rate rate of interest stated on the face of the bond. When the issuing corporation provides certainty of payment, the rate is relatively low. Market/Yield/Effective rate rate of interest in the market ER > NR Discount ER < NR Premium Discount is reported as direct deduction from the face value of the B/P. Premium is an adjunct account which is an addition to the face value of the B/P.

Types of Bonds Term bonds they mature on a single date Serial bonds mature in installments Secured bonds provide security and protection to investors in the form of specific assets of the issuer. - Real estate mortgage bond - Collateral trust bond (shares of stocks) - Chattel mortgage bond (movable asset)

Premium on B/P -In effect gain on the part of the issuing entity because it receives more than what it is obligated to pay under the bond issue, not treated as outright gain but amortized over the life of the bonds.(Dr PREMIUM, Cr INT EXP)

Discount on B/P - In effect loss on the part of the issuing entity because it receives less than what it is obligated to pay under the bond issue, not treated as outright loss but amortized over the life of the bonds.(Dr INT EXP, Cr DISCOUNT) Transaction Cost expenditures incurred by the issuing company for legal fees, printing and engraving bond certificates, taxes, commissions. It forms part of the initial carrying value of the bond (net proceeds are reduced). Its not treated as outright expense but amortized over the life of the bonds. Its a cost of borrowing. From 1,000,000 it became 1,085,000 Thus, from 12% it became 9.77% (Negative Relationship) 1st Trial and Error > 10% = 1,075,815 2nd Trial and Error > 9.5% = 1,095,995 To interpolate: 1,085,000 1,095,995 MULTIPLY (10%-9.5%) Amortization is a deduction from or an addition to the interest expense. It results to a gradual adjustment of the bonds carrying value to its face value; adjustment of the NR to ER. Amortization of Premium tends to reduce the CV and interest expense of the bond. Amortization of Discount tends to increase the CV and interest expense of the bond. Balance sheet: Bond carrying value Income statement: Interest Expense 1,075,815 1,075,815

the premature retirement of the old B/P through the issuance of a new B/P.

Bond Refunding a process acquiring outstanding bond issue and replacing it with a new bond issue with a lower interest rate. It is